STILLWATER MINING COMPANY 2010 Annual Report Stillwater Mining Company

COMPANY PROFILE TABLE OF CONTENTS

Stillwater Mining Company (NYSE:SWC) produces 1 Financial Highlights palladium and platinum, rare and precious metals essential 2 Letter to Shareholders in automotive catalysts to convert harmful air pollutants into 14 The Case for Palladium - 2011 Update harmless emissions, and also used in jewelry, electronic and dental applications. The Company is the only producer of 20 Marketing palladium and platinum in the United States. The Company’s 24 2010 Market Developments current mining operations are in south-central Montana 26 Stillwater Mine where it operates two underground mines along the J-M Reef, the world’s richest known deposit of platinum group 28 East Boulder Mine metals (PGMs). The Company’s operations include a nearby 30 Marathon Project smelting and refining complex where it concurrently processes 32 PGM Recycling concentrates from mined ore and spent catalytic material containing PGMs from its recycling business. The Company 34 Operating Responsibly also owns the Marathon PGM/copper mine development project which is in the permitting stage and is located at the Annual Report on Form 10-K north end of Lake Superior in north-western Ontario Canada. Corporate Information - inside back cover

ABOUT THE COVER The title “Palladium” Group Metals for PGMs on the cover of our report, rather than the commonly accepted Platinum Group Metals, celebrates “2010 as the year of Palladium.” This intentional twist on the PGM acronym heralds a turning point for palladium in 2010, the factors of which are discussed herein, some of which include – a vast Russian palladium inventory that provided 25% of worldwide supply for the last 20 years is considered nearing depletion; future PGM production is recognized as being constrained; automotive build, now at record levels, will surge a third more by 2015; catalytic converter requirements already consume over half of PGM production; driven by price, the 1-for-1 substitution ratio between palladium and platinum for vehicle catalytic converter applications is a technological reality, where substitution is possible; PGM ETFs were introduced into the United States; the United Kingdom hallmarked palladium for jewelry use, and, in recognition of these factors, the price of palladium doubled during the year.

PRIVATE SECURITIES LITIGATION Reform Act of 1995

Some statements contained in this annual report contain forward- expectations are set forth in the section entitled “Risk Factors” in the looking information, which involves expressions of management’s Company’s Annual Report on Form 10-K included herein and may current expectations. All forward-looking information is subject to be discussed in subsequent filings with the Securities and Exchange various risks and uncertainties that may be beyond the Company’s Commission. Descriptions of palladium and platinum markets are control and may cause results to differ materially from management’s not intended to be complete and readers are advised to obtain their current expectations. Information concerning factors that could own information on these markets. The Company disclaims any cause actual results to differ materially from management’s current obligation to update forward-looking statements. Financial Highlights

December 31, 2010 2009 2008

Financial Total revenues (millions) $ 555.9 $ 394.4 $ 855.7 Operating income (loss) (millions) $ 54.7 $ 4.3 $ (117.4) Net income (loss) (millions) $ 50.4 $ (8.7) $ (115.8) Net income (loss) per share Basic earnings (loss) per share $ 0.51 $ (0.09) $ (1.24) Diluted earnings (loss) per share $ 0.51 $ (0.09) $ (1.24) Operating cash flow (millions) $ 123.9 $ 59.7 $ 114.2 Stockholders’ equity (millions) $ 583.1 $ 446.8 $ 421.2 Weighted average common shares outstanding (millions) Basic 98.0 94.9 93.0 Diluted 99.2 94.9 93.0 Outstanding common shares (millions) 101.9 96.7 93.7

Palladium & Platinum Mine Production (ounces) Stillwater Mine Palladium 270,600 301,700 268,200 Platinum 81,100 92,100 81,200 Total 351,700 393,800 349,400

East Boulder Mine Palladium 103,500 105,300 116,000 Platinum 29,900 30,800 33,500 Total 133,400 136,100 149,500

Total Mining Palladium 374,100 407,000 384,200 Platinum 111,000 122,900 114,700 Total 485,100 529,900 498,900

Palladium, Platinum & Rhodium Recycling Production (ounces) Palladium 191,500 112,900 164,600 Platinum 178,500 119,100 199,800 Rhodium 29,400 19,000 33,700 Total 399,400 251,000 398,100

Operations Total ore tons milled 1,095,000 1,086,000 1,060,000 Total tons milled including subgrade 1,181,000 1,184,000 1,206,000 Combined mill head grade (ounces per ton) 0.46 0.50 0.46 Mill recovery 91% 91% 91%

Consolidated Production Costs (per ounce) Total cash costs $ 397 $ 360 $ 405 Depreciation & amortization $ 149 $ 135 $ 164 Total production costs $ 546 $ 495 $ 569

Metal Prices Mine Production Average realized price per palladium ounce $ 495 $ 365 $ 410 Average realized price per platinum ounce $ 1,488 $ 1,137 $ 1,387 Combined average realized price per ounce $ 721 $ 549 $ 630

PGM Recycling Average realized price per palladium ounce $ 456 $ 282 $ 401 Average realized price per platinum ounce $ 1,539 $ 1,143 $ 1,735 Average realized price per rhodium ounce $ 2,354 $ 2,088 $ 7,807

Market Average market price per palladium ounce $ 525 $ 263 $ 352 Average market price per platinum ounce $ 1,609 $ 1,204 $ 1,578 Combined average market price per ounce $ 773 $ 487 $ 628

1 To our shareholders

THE YEAR 2010 FOR YOUR COMPANY WAS EXCEPTIONAL ON MANY

FRONTS. AFTER THE ECONOMIC CHALLENGES OF 2008 AND 2009,

IT IS REFRESHING TO SEE THE COMPANY NOW REPOSITIONED AND

MOVING FORWARD SO DRAMATICALLY AS THE DEMAND FOR

PALLADIUM REBOUNDS. FRANK MCALLISTER

PALLADIUM PRICE DOUBLES market that sales from the vast Russian government palladium inventories built up during the Soviet era are either at or near Perhaps most exciting and beneficial – during 2010 palladium exhaustion – kaput, gone. emerged as the front runner in a very robust natural resource market – more than doubling in price from $395 per ounce I hope I have your attention, as last year “The Case for at the beginning of 2010 to $797 per ounce at year end ($800 Palladium” anticipated almost all those market factors. Let in New York). The provocative banner “Palladium Group me provide some background detail at this point and then Metals” on the cover of this 2010 Annual Report announces direct you to the section in our Annual Report entitled “The in a deliberate divergence from the more customary “Platinum Case for Palladium – 2011 Update”, wherein we again discuss Group Metals” that 2010 was the year of palladium and boldly the fundamental issues of supply and demand, and their highlights the news that the PGM market, and in particular impact on price. the palladium market, likely changed fundamentally during 2010 as we projected in our 2009 Annual Report. Supply r
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2 Headlining the 2010 developments, the price of palladium doubled in 2010 while the price of platinum rose 21%. Or, said another way, the dynamics underlying this market action – in a massive price re-rating – moved the price of palladium from 27% to 45% of the price for platinum. We suggest that this denotes the start of a fundamental shift in the relationship between these two metals. The question we raised last year and have continued to wrestle with remains, “Where is this pricing ratio headed from here?”

Palladium/Platinum Price Ratio December 31, 2009 - December 31, 2010 0.50

0.45

0.40

0.35

0.30

0.25 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10

We believe that price equilibrium between palladium and platinum may well be measured in the future relative to parity. Why? As technology advances, the factors supporting parity Stillwater Valley continue to build. The ability to substitute between palladium and platinum on a 1-to-1 basis in catalytic converters partial shift toward palladium; in China and the rest of the continues to expand. It was first achieved in 2002 and 2003 developing world where light vehicles are powered primarily for gasoline catalytic converters – the with gasoline engines and in Japan, a late comer, which had main market accounting for about largely stayed with platinum until the last couple of years. 50% of total PGM demand. And during 2010 it was achieved in the Other industrial uses for both palladium and platinum are laboratory for that portion of a diesel also expanding as the world economy continues to recover and catalytic converter where palladium grow. Such applications include electrical components (15% can be substituted for platinum. of 2010 palladium demand), chemical catalysts (4%), dental (At the same time, the technology fillings (7%) and other industrial demand (1%). Industrial also has advanced to allow about uses for platinum include electrical components (5% of 50% of the platinum in a typical 2010 platinum demand), petroleum catalysts (3%), chemical JOHN STARK diesel converter to be replaced with catalysts (4%), glass fiber (6%) and other industrial demand palladium – although the current (6%). But it’s jewelry that represents the second major use and average on the production line is about 20%.) And industry swing source of demand for PGMs. Platinum does and will analysts are projecting annual worldwide vehicle production always in our opinion dominate the luxury jewelry market, to increase by 50% over the next decade. This dynamic implies and it is and likely will always be the metal of choice for that industrial demand, where palladium currently has the bridal jewelry. But when palladium is used, due to its lower advantage, will be determining the price for the two metals – density, about two times more palladium jewelry pieces can not jewelry demand. be produced from equal weights of metal, a difference fully appreciated in the jewelry market at today’s high metal prices. In the two decades since, Ford Motor Company first What that means is there will be about the same number developed the palladium catalytic converter, palladium has of jewelry pieces produced from the projected 500,000 become the principal metal in automotive catalytic converters, ounces of palladium being used for jewelry this year as from accounting for about 90% of the metal used worldwide the projected 1,000,000 ounces of platinum being used for today to control gasoline engine emissions - in the United jewelry. States where it was first used; in Europe where over 50% of light vehicles powered with diesel engines are beginning a

3 Considering that the Russian government’s palladium Thus, it was logical for those producing automobile catalytic inventory is essentially gone, that primary mine production converters then to consider reverting back to the use of is constrained at just over 6 million ounces for each metal, platinum. This never happened for two reasons, both of and that world auto production is projected to surge to 100 which made the 2010 price move possible, even predictable million in 2015, PGM pricing dynamics are extremely robust (1) technological advances reduced the earlier “2 for 1” right now. substitution ratio when replacing platinum with palladium to a “1 for 1” ratio, and (2) the 2001/2002 market correction in Returning to the question of where the price ratio between which the palladium price fell from its lofty $1,090 per ounce platinum and palladium is headed, over the past 20 years, (180% of the price of platinum) to a low of $148 per ounce with the exception of the years 1999 to 2002, palladium has (26% of the price of platinum) by early 2003. At a 1-for-1 traded at an average of 26% of the price of platinum. During substitution ratio and a palladium price one-quarter of the the years 1999 to 2002 palladium averaged 90% of the price price of platinum, the groundwork was laid for palladium to of platinum (and even exceeded the price of platinum for a capture 90% of today’s gasoline catalytic converter market and time) while the market agonized and investors speculated to make substantial technological inroads into the platinum- over delays in issuing export permits for palladium sales out of based diesel catalytic converter market. Russia. Palladium/Platinum Price Ratio The reality of this consumption shift emerged in 2010 as the Feb 1, 1990 - Jan 3, 2011 market recognized that demand for palladium would soon far 2 outstrip supply – regardless of whether the Russian palladium 1.8 inventory was exhausted or not – and, as a result, its price 1.6 began to converge toward that of platinum. 1.4 1.2 2010 FINANCIAL AND OPERATING RESULTS FOR 1 STILLWATER 0.8 0.6 Net Income Palladium Price/Platinum Price Ratio of $50.4 million, 0.4 or $0.51 per diluted share, for 0.2 2010 represented a substantial 0 improvement over the loss of $8.7 Feb 1 Feb 1 Feb 1 Feb 1 Apr 1 million, or $0.09 per share, reported Some have tepidly suggested that the 2010 palladium price GREG WING for 2009. While the Company’s 2010 doubling is reminiscent of the 2000/2001 palladium price financial results benefited from strong bubble. But the market fundamentals today are entirely PGM prices, mine production of palladium and platinum different. When the price of palladium spiked from $315 which totaled 485,100 ounces in 2010, was below our original plan guidance of 515,000 ounces, and down 8.5% compared Palladium/Platinum Price to 529,900 ounces produced in 2009. The lower mine (2000 - January 2011) $2,500 production in 2010 was primarily attributable to operational and grade issues in the off-shaft area of the Stillwater Mine $2,000 which we reported on several times during the year. The $1,500 steady strengthening of prices over the course of 2010 for the Company’s primary products, palladium and platinum, more $1,000 than offset the effect of the lower ounce production relative to $500 2009.

$0 Revenues from mining in 2010 totaled $381.0 million, up Palladium Platinum from $306.9 million in 2009, on stronger realized prices in 2010 for the Company’s primary products, palladium and per ounce to $1,090 per ounce in 2000/2001, the price for platinum. platinum remained constrained, peaking at $640 per ounce.

4 Important to note as we move forward, benefiting from higher prices comes at the loss of the downside floor pricing protection that was available in the former contracts we entered into a decade ago and which have greatly benefited the Company over the years. Such contract terms were not available when the current contracts were renewed and we conclude, based upon our pricing outlook, the Company and its shareholders will handsomely benefit being unencumbered by price ceilings.

It is also important to note that at year end 2010, with palladium at $797 per ounce and platinum at $1,755 per ounce, our combined market basket price was $1,040 per Palladium product – ingot, sponge and plate ounce vs. the average combined market basket price for 2010 of $773 per ounce and for 2009 of $487 per ounce.

The Company’s average realized price on sales of mined Operating cost per ounce increased modestly during the year palladium and platinum was $721 per ounce in 2010, while costs per ton mined were held in check. substantially higher than the $549 per ounce average realized in 2009. It is important to note that had the 2010 sales At the Stillwater Mine total cash costs averaged $380 per taken place at market prices, the Company’s 2010 average ounce for the full year 2010, higher than originally planned selling price for mined production would have been $773 per and above the $344 per ounce actually realized in 2009. The ounce vs. the realized $721 per ounce, and the year before average cash cost per ore ton mined in 2010 at Stillwater Mine the Company’s 2009 average price would have been $487 was $171, less than the $174 per ton reported in 2009. The per ounce vs. the realized $549 per ounce. The Company’s higher cost per ounce in 2010 was mostly driven by the lower combined average realized price for each metal differed from ore grade at Stillwater Mine, rather than by rising costs or the equivalent average market prices as the result of various lower mining productivity. A higher than usual proportion pricing provisions contained in our now expired automotive of mining stopes in the off-shaft area of the mine are currently contracts, which included ceiling prices that limited pricing either early or late in their production life and are somewhat on a portion of the Company’s mined platinum in 2010, and smaller than has been typical in the past – both factors that floor prices that benefited the Company’s mined palladium might tend to result in more volatility in realized ore grades. during 2009. Also, a higher proportion of Stillwater Mine production came out of the upper west area of the mine in 2010 than was At the end of 2010 our sales contract originally planned, and ore grades in the upper west tend to be with Ford Motor Company, the lower than in the off-shaft area, while cost per ton mined there last of several long-term automotive tends to be lower. contracts containing protective floor and restrictive ceiling pricing terms, At the East Boulder Mine total cash costs averaged $442 came to an end. For 2009 the floor per ounce for the full year 2010, a little higher than planned prices had increased revenue by and substantially higher than the $407 per ounce averaged $32 million in that year’s low price in 2009. In East Boulder’s case, total cash costs per ore ton environment, but for 2010, as prices mined averaged $147, exactly on plan but higher than the RHONDA IHDE increased, the ceiling prices and other $136 reported in 2009. The year-on-year difference is mostly provisions reduced revenue by about attributable to the quality of areas available to mine and an $26 million. Renewal contracts entered into for 2011 and increase in mine development, issues recognized and reflected beyond are now based primarily on prevailing market prices. in the original 2010 mine plan at East Boulder. Under the new contract terms, shareholders will enjoy the full unencumbered benefit of the stronger pricing environment Major cost elements at the mines include labor (56%), power that we project going forward. (5%) and fuel (4%), mining materials and supplies (27%) and contracted services (8%). Major cost elements at our smelting

5 and refining metallurgical complex and recycling operation pursued North American PGM acquisition opportunities. include labor (44%), energy (11%), materials and supplies And we completed the major restructuring of our recycling (17%) and contracted services (26%), excluding the cost of facilities and business structure. acquiring recycling material. Stillwater Complex Projects - Engineered and Moving Capital spending for 2010 totaled $50.3 million, $6.7 million Ahead– An initiative to study opportunities along the short of 2010’s $57.0 million final guidance. Stillwater Complex was reported on at mid-year, and in November 2010 we announced plans to proceed with Stillwater Mine expenditures were $34.1 million, exceeding two mine resource delineation and development projects: plan and well ahead of the $26.7 million spent during 2009. the Graham Creek project, immediately to the west of Primary development at the Stillwater Mine advanced about the Company’s East Boulder Mine, and the Blitz project, 19,700 feet during 2010, about 13% ahead of plan, but to immediately to the east of the Company’s Stillwater Mine. some extent this was at the expense of secondary development, which at about 14,500 feet was 18% behind plan. Diamond Both projects lie within the boundaries of existing mining drilling footages in 2010 at the Stillwater Mine totaled about permits, and each would initially be serviced from existing 291,000 feet, about 8% better than planned. mine infrastructure. Based on indications from historical surface delineation drilling in these areas, both projects are East Boulder Mine expenditures viewed by the Company as having a high probability of totaled $6.5 million compared to ultimately adding significantly to the Company’s probable $4.4 million in 2009. Actual primary PGM reserves. development at the East Boulder Mine advanced about 3,500 feet Over the next several years, the Graham Creek project aims during 2010, lagging the plan, while to extend development of the East Boulder Mine ore resource secondary development advanced about 8,200 feet further to the west. East Boulder Mine’s 12,500 feet in 2010, slightly above tunnel boring machine (TBM), which was used about a plan. In total, development footage decade ago to develop initial access to the JM Reef and then TERRY ACKERMAN at the East Boulder Mine was about the west footwall lateral access paralleling the mineralized JM 3.5% behind plan, reflecting delays Reef, has recently been re-commissioned for this new project. in getting a new development crew in place and operating. Initial work will assess the continuity and structural controls Diamond drilling footage totaled about 81,500 feet at East related to the JM Reef in this area on the far western end of Boulder in 2010, about 17% behind plan, in part driven by the the Stillwater Complex. lower primary development. Based upon historical surface drilling and production Metallurgical complex and recycling operation expenditures experience to date at East Boulder Mine, the project totaled $9.1 million in 2010, compared to $8.3 million potentially could develop over time up to 6 million additional in 2009. Major spending was for completion of the new tons of ore grading on the order of 0.41 Pd+Pt in-situ ounces recycling operations processing and sample facility and the per ton. Once the initial development is completed, any future contiguous automated assay laboratory. mining in this area would require adding ventilation raises and additional infrastructure prior to beginning ore production. GROWTH PURSUED  PRICE FACTOR Costs to complete the TBM development drive and assess the PGM resource for the Graham Creek area are projected The Case for Palladium contained in our 2009 Annual Report at about $8 million over the next five years. The project is was a serious analysis of a game changing moment in mineral/ expected to yield information on the Graham Creek resource metal economics. Based upon our conclusions regarding as diamond drilling work is completed behind the TBM drive. the outlook for palladium, we implemented or accelerated a number of strategic initiatives. We commissioned an internal The Blitz project at the Stillwater Mine is designed to explore engineering team to study tactical and strategic opportunities and define the PGM resource along the far eastern extent of to develop new reserves and production opportunities along the JM Reef. It will extend some 13,500 feet to the east of the Stillwater Complex. We followed up on long studied and the existing Stillwater Mine via two conventionally driven

6 footwall laterals from the 5000 and 5600 levels. Diamond The transaction to buy Marathon drilling and geologic evaluation will be concurrent with PGM was structured as a 50:50 split footwall lateral advance on both levels. of cash and Stillwater shares, based on Stillwater’s closing share price at Once the Blitz assessment project is completed, additional September 3, 2010. According to the development will require excavating terms of the transaction, Stillwater new ventilation raises to support exchanged 0.112 common shares of bulk sampling, final pre-production its stock and Cd$1.775 in cash for development and eventual ore each outstanding share of Marathon production. Based upon production RALPH GREEN PGM. At the time the agreement was experience to date and historical announced, the total consideration surface drilling, we believe the project to be paid by Stillwater for the transaction was valued at has the potential over time to define approximately US$118 million, or Cd$3.55 per Marathon up to 9.5 million additional tons PGM share. KEVIN SHIELL of resource grading on the order of 0.71 Pd+Pt in-situ ounces per ton. The properties acquired by Stillwater also include the Geordie The project will begin to yield resource results within its first Lake discovery situated about 8 kilometers to the west of couple of years. Initial development and resource evaluation the Marathon project, and Marathon PGM’s interest in an costs for the Blitz area are expected to total about $68 million emerging PGM resource in Manitoba known as the Bird River to be spent over the next five or six years. property. Both properties may represent additional long-term exploration opportunities. Historical surface drilling along the 28-mile extent of the Stillwater Complex confirmed continuous palladium and And, in late 2010, Stillwater announced that it had agreed to platinum mineralization essentially along the full extent of acquire Benton Resources’ Bermuda PGM property, as well the JM Reef, but extensive portions of the reef still await more as Benton’s 2% NSR royalty interest in the Marathon project. detailed delineation. The team reviewed the historical data This transaction closed in March 2011. Benton retains a 1% and identified several potential resource development projects NSR royalty on any ores mined from the Bermuda property along the Stillwater Complex, of which the Graham Creek beyond a production threshold of 2.5 million aggregate and Blitz projects were considered the most promising. ounces of palladium, platinum and gold. Stillwater paid Benton C$14 million in a 50:50 split of cash and Stillwater Acquisition of Marathon PGM Corp. and Adjacent Properties shares. Stillwater acquired Marathon PGM Corporation’s Marathon PGM/Copper project which is located at the upper end The 7,300 hectare Bermuda property is located along the of Lake Superior in Ontario, Canada in late November eastern and northern margins of the Coldwell Complex near 2010. It is anticipated the project, once in production, will Marathon, Ontario and adjoins both the Marathon PGM/ increase Stillwater’s palladium and platinum production Copper project and Geordie Lake exploration property. by approximately 40%, following a projected three-year Historical geologic and geophysical studies and exploration permitting and development period. Based on current prices, drilling by Benton and others have indicated the presence the transaction was immediately accretive on a net asset value of PGMs, copper and nickel on the property which the per share and reserve per share basis and is expected to be Company views as an attractive indication of the area’s highly accretive to Stillwater’s cash flow once the Marathon discovery potential. project begins production. Stillwater currently intends to fund the development of the Marathon project with current cash The acquisition of Benton’s Bermuda property directly balances and future free cash flow but may seek long term complements the acquisition of the Marathon PGM/Copper financing if conditions and opportunities so warrant. The project and provides Stillwater with a dominant position Marathon project’s PGM/Copper reserves are situated on one on the more prospective portions of the Coldwell Intrusive of Canada’s largest PGM/Copper resources, which Stillwater Complex. It also provides the opportunity to coordinate believes holds significant potential for further growth in continued exploration of the Bermuda property with the reserves and future production. development and operational plans for the Marathon PGM/

7 Copper project and the Geordie Lake exploration properties. Economic models of the Marathon PGM/Copper project Further, acquiring Benton’s royalty position on the Marathon suggest that, at current prices, by-product credits generated PGM/Copper deposit enhances the economics of our from copper sales should be sufficient to offset the cost of planned Marathon operations. PGM mining. The measured and indicated resource at the Marathon PGM/Copper project is anticipated to support These purchases are expected to provide significant value mining about 200,000 ounces per year of palladium and and upside potential to the Company. The Marathon platinum, at a 4-to-1 ratio, for up to twelve years. The PGM/Copper project is one of the few near-term PGM potential to extend the life of the Marathon PGM/Copper development opportunities in North America and solidifies project exists to the west and at depth, and from the nearby Stillwater’s position as North America’s leading PGM Geordie Lake property, but this will need to be confirmed producer. We have long recognized that geographic and over time. The Marathon PGM/Copper project is being commodity diversification is an important engine of growth planned in close cooperation with Canadian national and for our company, and these acquisitions fit perfectly into our provincial authorities, as well as with First Nations in the long-term strategy to create value for our shareholders. Our reserve areas, giving careful attention to environmental and post-acquisition PGM reserve base and production scale cultural sensitivities. Stillwater has a corporate tradition of should increase significantly across mines in the U.S. and detailed attention to environmental and community matters. Canada and will position the Company to capitalize on robust PGM fundamentals and the favorable pricing outlook.

Geological mapping - Marathon Project

8 Recycling Business Structure Modified – The Company’s from both higher volumes and stronger PGM prices; 2009 transformation of its recycling business dramatically advanced recycling revenues totaled $81.8 million on sales of 102,000 during 2010 with the completion of a state of the art combined ounces. processing and sample facility, and the contiguous automated assay laboratory. In 2010, the Company earned $11.5 million from recycling operations on revenues of $168.6 million, reflecting a The processing and sample facility combined average realization (including rhodium) of $1,046 increases Stillwater’s receiving and per sold ounce. By comparison, in 2009 the Company’s sampling capacity for recycling four- net income from recycling operations was $6.5 million on fold, providing the ability to handle revenues of $81.8 million with a combined average realization product from multiple shippers. The of $779 per sold ounce. facility is equipped to efficiently provide assay samples ready for The total volume of recycling material processed during 2010, analysis in the assay lab as well as including tolled material, averaged 16.2 tons per day, up from preparing the material for processing. 10.0 tons per day in 2009. Strengthening PGM prices in GREG ROSET 2010 have created a greater incentive for suppliers to collect The assay lab employs state of the art recycling material, and during 2010 the Company was able x-ray technology which is the result of extensive technical to enter into new sourcing arrangements for catalyst material testing for over two years. The lab dramatically increases our with several suppliers. assay capacity, sharply accelerates the turnaround of assay results and reduces assay costs. NORILSK NICKEL SELLS MAJORITY INTEREST IN BROAD PUBLIC OFFERING These new facilities are adjacent to and part of the Company’s smelter and base metals refinery complex in Columbus, In December of 2010 Norimet Limited, a wholly-owned Montana where the spent catalytic converter material is subsidiary of Russian nickel producer, MMC Norilsk Nickel, commingled with the Company’s mined production for sold its entire 49.8 million share interest in Stillwater to a efficiency of processing. In fact, the copper and nickel sulfides broad spectrum of independent investors in a highly successful contained in the mine concentrates act as the collector of secondary stock offering valued at nearly $1 billion. The the PGMs contained in the catalyst, thereby enabling our transaction brought to an end Norilsk’s 7-1/2 year majority recycling business. In 2009 a new primary electric furnace ownership position and affiliation with Stillwater as it no was commissioned providing Stillwater with improved longer owns any shares of Stillwater’s common stock. smelting efficiencies and increased recycling capacity. The original electric furnace is currently being converted for use The Norilsk Nickel/Norimet offering memorialized the as a slag cleaning furnace and to serve as backup to the new culmination of a highly successful palladium marketing primary furnace. venture begun in 2002/2003 between Norilsk Nickel and Stillwater, a venture initiated by Norilsk Nickel which initially The Company processed about served to assure the U.S. auto industry that adequate supplies 399,400 combined ounces of recycled of Russian and U.S. palladium would be available for catalytic platinum, palladium and rhodium converters, and which ultimately led to the worldwide into the smelter in 2010, of which adoption of palladium as the primary metal in catalytic roughly 40% was from material converters for all gasoline engine cars. purchased by the Company and the remainder was toll processed on One of the favorable outcomes of the Norilsk Nickel sale is behalf of others for a fee. Total ounces the doubling of our stock trading liquidity in the market – processed in 2010 were up 59% without any shareholder dilution. This factor has allowed DAVE SHUCK compared to the 251,000 recycling some investors, otherwise restricted from owning Stillwater ounces processed in 2009, a year shares to also invest in your Company. Consequently, we have when the auto market was severely depressed and so fewer welcomed quite a number of significant new shareholders. vehicles were scrapped. Recycling revenues in 2010 were $168.6 million on 156,100 combined ounces sold, benefiting

9 2011 OPERATING GUIDANCE Marketing Budget – Over the past several years the Company The Company’s operating guidance for 2011 is for the has budgeted a modest sum to be used for marketing Stillwater and East Boulder Mines together to produce palladium jewelry. For the year 2010 we have increased that 500,000 combined ounces of palladium and platinum at a amount to $10 million recognizing the reduced levels of total consolidated cash cost per ounce of $430, and capital spending in 2009 and 2010 left some sectors of the market expenditures of about $120 million. without the necessary support. We are also finding that the jewelry market has retained its interest in palladium Production - The plan to produce 500,000 ounces in 2011 as a jewelry metal, and so we are now stepping up our takes into account the lower grades realized in the off-shaft spending through the Company-formed Palladium Alliance area of the Stillwater Mine in 2010 and compensates for the International. shortfall by assuming that some production resumes from the higher grade ores of the east side of the mine in 2011. New sales contracts for 2011, include arrangements with Management’s assessment of mining conditions for 2011 Ford Motor Company, General Motors Corporation and suggest that ore grades at the Stillwater Mine are likely to BASF Corporation. Departing from our former mostly remain a little lower on average than in the past, reflecting percentage-of-production contracts, the new contracts are for the same higher variability in the lower off-shaft area as was fixed ounces to be delivered on a monthly basis. experienced during 2010. These lower realized ore grades centered in the lower off-shaft area seem to be mostly the We also are very pleased to have signed a 2011 platinum sales result of having smaller, more variable stopes to mine there contract with Tiffany & Co. that introduces a whole new than in prior years. spectrum of client to our customer base. Tiffany, recognizing our commitment to environmental excellence, approached Costs - The targeted 2011 combined average total cash us in the last half of 2010 to inquire if Stillwater would be cost per ounce of $430 per ounce for the mines compares interested in providing a portion of its platinum requirements to the combined average total cash cost per ounce for the to be used in its jewelry manufacturing operations. year 2010 of $397. The increase in 2011 reflects a rising Representatives of Tiffany then visited Stillwater’s operations cost trend during 2010 plus general inflation for wages and and concluded that the Stillwater approach to sustainable, materials, and the effect of higher average sales realizations on environmentally sound and community oriented operations royalties and taxes, all partially offset by slightly higher mine fit well with their supplier requirements. We are pleased production in 2011. with this business recognition of one of our core operating principles. Capital Spending - Projected capital expenditures for 2011 of $120 million represent an increase of 139% over the $50.3 million spent during 2010. Capital spending in 2009 and 2010 was restricted in order to conserve cash, so the 2011 budget includes spending to compensate for the shortfall in those prior years, plus spending at a higher rate to replace 2011 anticipated production, plus some additional development spending to advance the developed state of the mines. The 2011 capital budget also includes significant equipment replacement, a provision for some modest capital needs on the newly acquired Marathon properties and some initial development spending for the two long-term resource delineation projects along the JM Reef, Blitz and Graham Creek, announced during 2010. More specifically, the budget includes $10 million for the Blitz and Graham Creek projects, $10 million for the Marathon project, $10 million for advanced long lead time equipment for delivery in 2012, and $7 million for the electric furnace rebuild.

10 SAFETY AND ENVIRONMENT

Committed to Safety - The Company maintains that companies with safe operations also tend to be well managed and efficient in other important areas. Various internal programs support the Company’s safety efforts, including annual refresher training and other training programs, pre-shift employee inspections of each work area, regular workgroup discussions of current safety issues and incidents, detailed accident investigations to identify root causes, reporting of KRIS KOSS near misses that could have resulted in injuries, and “safety stand- downs” to re-emphasize safety principles as necessary. The Company also responds promptly to correct any safety issues, whether identified internally or by Mine Safety and Health Administration (MSHA) inspectors, and to eliminate unsafe Ore loading in the East Boulder Mine work practices.

Safety performance at the Company’s mining operations falls neighbors. We entered into this under the regulatory jurisdiction of MSHA. The Company’s important environmental accord ten overall safety performance (including contractors on site), years ago when Stillwater Mining measured in terms of reportable incidents per 200,000 hours Company, the Northern Plains worked, was 3.65 during 2010, a modest improvement over Resource Council, the Stillwater the 4.14 rate reported for 2009. In 2010 we received notice Protective Association and the from MSHA that the concentrators at each of the mines Cottonwood Resource Council were awarded the prestigious Sentinels of Safety award for established an innovative agreement the Large Metal/Non-Metal Mill Group. The Sentinels of that strives to protect the natural Safety program is administered by MSHA and recognizes BRUCE GILBERT environment while encouraging outstanding safety performance throughout the nation. responsible economic development. The agreement – simply known as the “Good Neighbor The Metallurgical Complex safety performance falls under the Agreement” – is a legally binding contract that has become a regulatory jurisdiction of OSHA. The reportable incident template for dispute resolution and positive interaction in the rate (including contractors on site) was 2.48 during 2010, permitting and development of natural resources projects. compared with 3.24 in 2009. In June of 2010 the Smelter was presented a 3-year Safety and Health Achievement A decade ago reaching a win-win agreement between a mining Recognition Program (SHARP) Award from OSHA. company and local stakeholders was a rarity, – even now it’s The Analytical Laboratory and Base Metals Refinery each a rarity – and reaching the same type of agreement with non- underwent a comprehensive safety and health review and have governmental organizations is even rarer yet. Environmental both applied for recertification of their SHARP Awards. gridlock and a “culture of conflict” dominate when it comes to the permitting and development of mineral projects and Celebrating the “Good Neighbor Agreement” Environmental litigation is commonplace. Accord in August 2010 was a fitting prelude to the Tiffany & Co. agreement. The celebration commemorated the tenth Stillwater and the councils were no strangers to this type anniversary of an unusual arrangement between a mining of gridlock, and had locked horns on a variety of mine company and local environmental advocacy groups and development issues. But, after many years of strife and

11 and lengthy, taking the better part of a year to complete, and implementation of the multifaceted agreement required an additional 18 months to put into place. The Agreement includes disclosure of otherwise confidential matters, an arbitration process, participation in planning, inspections, audits and agency correspondence, action as to issue and in general transparency regarding environmental and community matters.

Today, looking back over 10 years, the significance and relevance of the Good Neighbor Agreement remains intact and both sides remain strongly committed to the process. The recent ten year celebrations of success and goodwill went on for several weekends at several locations – and included our Board of Directors.

We believe the Agreement can be an example and force for change within the industry by demonstrating willingness on the part of participants – on both sides – to break with the failed policies and practices of the past.

FINALLY  PLATFORM FOR THE FUTURE

Many good things transpired in 2010.

But it is the culmination of events over the past two decades that emerged during the year that make most of the difference for palladium. The adoption of palladium as the primary metal used for catalytic converters, the emerging current and the future soaring auto build, the depletion of the massive Russian inventory accumulated over five decades, the acceptance of palladium in the jewelry sector, the creation of PGM ETFs and the constrained supply from major producers Miner using jackleg drill – have all combined to change the world for palladium forever as we move forward. 2010 was the year of palladium – and we controversy, the councils, with grit and determination, conclude it may have just been its delayed coming out party approached Stillwater with the concept of an agreement. and there is still more to come.

Stillwater’s history of environmental management, community On top of this Norilsk Nickel concluded to sell its majority involvement and operating practices made such an agreement interest in a sort of palladium marketing “mission- attractive. And being a producer of palladium, used primarily accomplished” exit, freeing Stillwater to pursue its own path in catalytic converters, we were naturally motivated and forward. In a preview of what can be done Stillwater executed committed to minimize our environmental footprint. a number of growth initiatives – the Marathon and Bermuda acquisitions, the engineering of the Graham Creek and Blitz So with an equal amount of grit and determination Stillwater projects, and the completion of the new recycling facilities. management accepted the invitation to discuss such an arrangement. It would be wrong to suggest this was easy – Our “Good Neighbor” environmental accord concluded conceptual agreement and formal negotiations were laborious its 10th anniversary with celebrations including neighbors,

12 environmental activists, company employees and our board may influence, but we cannot control. We have seen wide joining in. We remain committed to its goals, both in swings in price over the past decade and this may occur Montana and elsewhere. again. Moreover, in the last few years we were subject to both a worldwide financial crisis and the aggressive buying During 2010, we continued to utilize and improve our safety of commodities by China and other emerging nations. In management system by engaging employees at all levels of short, we can only control those things where we have a direct the organization with the intent of reaching sustainable input. That being said, we plan to be opportunistic when performance improvement. We are committed to everyone circumstances warrant, to further our development efforts in going home safe, every day. times of good pricing, to be vigilant about our costs and to promptly modify our budget and spending when called for. With the changes wrought by the Company, during 2010 Our goal is to keep our finger on the pulse, to stand on tables and the departure of Norilsk, we made changes within our (so to speak) and cry out “Palladium” and to remain nimble. Corporate Officer ranks to help manage and guide the activities of the Company as we move forward including As I have done now many times, I wish to recognize and appointing John Stark, Executive Vice President and acknowledge the commitment, dedication and resolve of all Chief Commercial Officer; Kevin Shiell, Vice President of our employees in contributing to our performance during Stillwater Mine Operations; Kris Koss, Vice President the year 2010 and in their dedication to our future. We also Human Resources and Safety; Bruce Gilbert, Vice President appreciate our suppliers and customers. We acknowledge the Environmental and Governmental Affairs; Ralph Green, strong support from our good neighbors, the communities in Vice President Exploration; Greg Roset, Vice President which we have a presence and from our elected leaders. We Smelter Operations and Dave Shuck, Vice President, Refinery greatly appreciate their understanding and support. Operations. Finally, with all that has happened this year I want to Continuing in their current assignments along with me are thank our directors for their dedication and assistance to Greg Wing, Vice President and Chief Financial Officer; management through the years, both thick and thin. With Terry Ackerman, Vice President, Planning and East Boulder Norilsk Nickel’s original investment came a contractual right Operations and Rhonda Ihde, Corporate Controller. to appoint a majority of the Board, though it also called for the appointment of a certain number of independent We were also pleased to announce in late February that Stan directors. The independent directors so appointed most Emms has joined Stillwater Canada Inc. as General Manager recently included Craig Fuller, Steve Lucas and Mike of the Marathon PGM Project. He adds to the strength Schiavone, all of whom provide insight and value, both to of David Good, Vice President Exploration for Stillwater Stillwater and to me. We have asked them to remain on Canada Inc., the exploration geologist responsible for defining the board and I am pleased that each has so agreed. We the Marathon project on the Coldwell Complex, and Tabatha also acknowledge the contributions of Ajay Paliwal and LeBlanc, Environmental Manager for the Marathon PGM- Mark Sander who served most recently as non-independent Copper project, the environmental expert guiding us through Norilsk appointed directors, then stepping down as the sale of the permitting process for the project. Norilsk’s Stillwater shares was completed. And to the so called “public directors” during the Norilsk era, Pat James, Sheryl Further, we have examined and modified our Corporate Pressler and Mike Parrett – to whom we are most grateful for Mission Statement with the objective of providing their patience, support and insight. management guidance for the future. Its focus is crisp and to the point – Operate Responsibly; Develop and Grow, and Position the Company. It is laid out in greater detail in the following pages.

Now, while I am very pleased with 2010 and my outlook also is optimistic, I would be remiss not to acknowledge the inherent risks and uncertainty in the future. Palladium, Frank McAllister our primary product, is subject to market prices which we Chairman and Chief Executive Officer

13 The Case for Palladium – 2011 Update

Best in Market for 2010

IN OUR STILLWATER MINING COMPANY 2009 ANNUAL This is a game-changing dynamic for palladium. Game changing because the pricing ratio between the two metals for REPORT LAST YEAR, WE INCLUDED AN ANALYSIS OF the 40 years ending 2009 – excluding the five years 1998 to PALLADIUM MARKET FUNDAMENTALS THAT WE CALLED, 2002 – averaged about 28% - and, even if we include those five years, it averaged only about 36%. During the five years 1998 “THE CASE FOR PALLADIUM.” OUR ANALYSIS POINTED TO to 2002 the palladium price surged and then subsequently CERTAIN KEY SUPPLY AND DEMAND FACTORS THAT HAVE crashed as the market fretted and speculated over the supply of palladium and its dominant Russian source following the CONSTRAINED THE PRICE OF PALLADIUM IN THE PAST auto industry’s aggressive move to palladium from platinum in the mid-1990s. AND CONCLUDED THAT THE PALLADIUM MARKET WAS

APPROACHING A STRUCTURAL SHIFT. THIS UNDERLYING So, the riddle we posed last year is yet to be resolved. Where is the appropriate equilibrium between the prices of the two THESIS OF “THE CASE FOR PALLADIUM” WAS BUTTRESSED BY metals? Listed below are the key factors. They have changed PALLADIUM’S ACTUAL PERFORMANCE DURING 2010. some from a year ago, mostly in palladium’s favor.

Palladium closed out 2010 at $800 per ounce in New York, THE PALLADIUM STORY LAID BARE up just over 100% from a year earlier. This was directionally 2011 Headlines Still Blare in line with what “The Case for Palladium” had projected. Supply By way of comparison, the price of platinum closed 2010 at r

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14 GLOBAL MINE SUPPLY CONSTRAINTS

PGM Supply Trends Palladium Mine Supply Has Declined 15% Since 2006

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SUPPLY In Russia, palladium is produced as a by-product of the world’s largest nickel operation at Norilsk Nickel.


t Constrained Mine Supply – The supply of PGMs continues Consequently, any sustainable increases to palladium to be constrained – principally by the very nature of the production there require large, multiyear infrastructure primary sources of these metals. Just two regions supply investments and a nickel resource and price outlook 90% of all PGMs produced worldwide: deep underground adequate to justify such investments. Further, production in the South African Bushveld Complex and the remote increases must be considered in light of their impact on arctic region of Russian Siberia. the market for Norilsk’s primary product, nickel.

The headwinds faced by South African producers that we

t Russian Inventory Depleted – The size of the Russian discussed last year have not diminished, and announced government’s palladium inventory, which remains a project ramp-ups remain inadequate to sustain current state secret, is becoming a little less obscure – and more production going forward. These South African voices than a year ago are saying it appears to be near or at headwinds include safety challenges, skills shortages, an exhaustion. Both Norilsk Nickel employees and a Russian unfavorable exchange rate, and mine quality and technical Treasury official have opined that the inventory is expected issues that have plagued the industry there for the past to be “finished” in 2011. The inventory has been the source decade. Production which peaked in 2006 has yet to move of over 25% of worldwide palladium supplied to market solidly ahead. during the past 20 years – exceeding 30 million ounces in total.

15 GROWING RECYCLING SUPPLY INSUFFICIENT TO BRIDGE SUPPLY DEFICIT

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t Recycling Supply Grows – Recycling volumes are estimated State Palladium Stockpile Nears Depletion to have rebounded by 15% in 2010 and are projected to 11 October 2010 grow by a further 25% during 2011 to 2.8 million combined Reuters ounces of palladium and platinum. “Norilsk Nickel, the world’s biggest producer of autocatalyst DEMAND metal palladium, said Friday that it expected Russian state stocks of the white metal to be finished next year.”

t Global Vehicle Build – The surge in worldwide auto build following the economic downturn is now accelerating. Not only was global auto production back to record levels in 2010 at a reported 75 million light vehicles, but by 2015 it The Wall Street Journal Markets is projected to eclipse 100 million autos, - five years sooner 'SJEBZ ̓/PWFNCFS̓ ̓̓"T
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t Palladium Dominates in Gasoline Emission Catalytic …But the Russian official told Dow Jones the country’s palladium Converters – The move to palladium for gasoline catalytic reserve has been depleted in recent sales and that Gokhran is not converters is complete – globally. Palladium now accounts acquiring any new stocks… for about 90% of all catalyst used in new applications for gasoline auto emissions. And – the substitution ratio between the two metals is one-for-one – they are virtually interchangeable in gasoline engine applications.

16 t
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PGM DEMAND DRIVEN BY AUTO MARKET Surging World Car Build Rate ETFs Creating Incremental Demand

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t Palladium Use Rising in Diesel Emission Catalytic

t Investment Demand – Investor demand for PGM ETF’s Converters – The use of palladium in diesel catalytic surged as they were introduced into the U.S. market in converter and diesel particulate matter filter applications January 2010 and then continued to grow fairly steadily has advanced. A year ago we reported that substitution to throughout the year. ETFs are expected to attract more palladium from platinum was possible for up to fifty percent investment as recognition of the tightening PGM supply- of the diesel catalytic application – at a two-for-one ratio. demand becomes more widely understood. Some analysts Over the past year technology has moved this substitution are suggesting a rotation will occur out of fixed income and ratio (in the 50% where substitution is possible at all) to perhaps even defensive securities (gold) into pro-cyclical one-for-one – a “game changing” development in diesel. At commodities such as agriculture and base metals (copper) – present palladium accounts for about 20% in new and of course PGMs. diesel applications. SUPPLY DEFICITS TO AFFECT PRICE

t Off-Road Equipment Catalytic Converters – Beginning this year, all off-road diesel equipment is required to be

t Projected Market Imbalance – Palladium demand for equipped with catalytic converters – a significant increase the foreseeable future is projected to far outstrip supply – in heavy-duty diesel consumption of platinum, which is which is an impossible situation in the real world. Such expected to grow from 500,000 ounces per year for heavy- being the case, as demand grows the available supply of duty on-road and off-road applications in 2010 to about palladium will be rationed by price into its most price 2 million ounces by 2014. These applications primarily inelastic uses – or until the pricing ratio between palladium will utilize greater amounts of platinum, but palladium use and platinum converges enough to entice consumers to for this application also is projected to rise from 150,000 move from palladium back to platinum. At a 1-for-1 ounces per year today to 500,000 ounces per year by the end substitution ratio between palladium and platinum, such of 2014. a circumstance would suggest palladium would have to approach price parity with platinum. However, to the

t Non-Automotive Catalytic Converters – Motorcycles, extent that a move from palladium to platinum will require motorbikes, lawn mowers, power boats --- all are re-tooling, the palladium price probably would have to increasingly required to be equipped with catalytic exceed the platinum price before such reverse substitution converters – principally using palladium. would occur. 17 PROJECTED MARKET IMBALANCE

Palladium Net Supply Deficit by End of 2010 Platinum Net Supply Deficit by End of 2011 (000s of oz) (000s of oz) 1,490 1,310

940 650 540 530 380 260 40

(10) (30) (70) (210) (280) (380) (540) (710) (820) (840) (930) (960) (980) (1,050) (1,180) (1,270) (1,730) (1,770) (2,000) (2,100) (2,300) (2,860)

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speculated on a solution to the equilibrium price riddle substitution ratio between palladium and platinum by suggesting that the equilibrium price ratio between technically has progressed to one-for-one for catalytic palladium to platinum should be at least 50%. With that converters, both in gasoline applications and in the 50% price ratio now all but realized, and in view of the increasing of diesel applications where substitution to palladium technical interchangeability between the two metals in their is possible. In a robust market, the initial two-for- principal catalytic applications, we are now of the opinion one substitution ratio for both applications suggests that the price ratio between the two metals will converge a pricing ratio between the two metals on the order further going forward. Indeed, with the changes discussed of 50% – approximately the level it moved to during above, some analysts we have spoken with are of the opinion 2010. However, to the extent the technical one-for- today that the equilibrium price ratio will approach parity. one substitution ratio for both applications is actually achieved in these applications going forward, we would Here then is one further stab at a solution to the riddle – expect to see palladium moving further towards parity with platinum. This in particular will be the case while r

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18 PROJECTED MARKET IMBALANCE

Palladium Supply/Demand Drivers Palladium Price Has Significantly Outpaced Platinum Supply Palladium Prices Platinum Prices 12/31/09: $409 12/31/09: $1,471 t

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2007 2008 2009 2010 2007 2008 2009 2010 substitution is possible Gasoline Diesel

Palladium-specific supply/demand drivers suggest prices will continue to rise

Source: Bloomberg, Johnson Matthey.

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1. Cost driven – at the margin, as costs increase price needs to prices, platinum will hold the edge over palladium adjust upward in order to cover the cost of producing the because of the insightful jewelry marketing programs next ounce of metal. sponsored by the Platinum Guild International that drive demand creation in a down market. But the 2. Incentive pricing – price must be sufficient to bring the pricing relationship is still likely to be determined next unit of shut-in production back on line or to justify the from a position of parity, rather than off the historical next investment in new or replacement production. price spread, as industrial demand ultimately will dominate pricing. 3. Demand destruction – at the margin, price must reach a level that removes the next unit of demand (with higher r

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price elasticity) from the market in order to reestablish the with the precious metal/jewelry marketing case for balance between supply and demand. palladium. Although we expect platinum to remain the premier jewelry metal, at price parity palladium still Given each of these comes into play when there is a market enjoys an advantage over platinum in jewelry – because shortage of PGMs, we would expect that pricing for both it’s lower density allows almost two times as much palladium and platinum will move up. Our conclusion is that jewelry per ounce of metal to be made as compared palladium will continue to move up at a more rapid rate. There with platinum – or gold. is a simple reason for that. The most inelastic demand for both metals is industrial, and it is industrial demand that is driving Because it appears that the PGM markets are on the verge the projected growing supply deficits. In industrial applications, of becoming much tighter going forward, we need to think palladium’s price must rise until consumers are no longer about PGM price dynamics at three levels – each potentially incentivized to substitute it for platinum - and at one-for-one driving market pricing dynamics for a market in short supply. substitution, that price must approximate parity.

19 Marketing

GROWTH IN THE FINE JEWELRY SECTOR

Markets outside of the automotive industry will prove to be an excellent hedge.

The year 2011 began with significant strides for palladium (PAI) within the jewelry industry. Competitive metal pricing has soared over the last few years with platinum trading a little below $1700 per ounce and gold trading just below $1400 per ounce*. Soaring prices have resulted in consumer push-back and a considerable loss of sales opportunities. Manufacturers and designers are looking for a quality alternative. Retailers are looking for a quality alternative. With its unique attributes and affordable cost, palladium presents designers, PAI has also assembled the most knowledgeable team in manufacturers and consumers the perfect alternative. education, training and marketing in the jewelry industry. Programs are being developed to support designers currently PAI is positioned to take the market by storm with plans to working with the metal, along with some of the best training re-introduce palladium to a waiting public and trade. and support geared to educating designers who meet the PAI brand standard. Education and training will continue on the In January, 2011, two top-tier designers won the Spectrum jewelry retail level. Award - one of the jewelry industry’s most prestigious awards from the American Gem Trade Association (AGTA). Cynthia In-depth research completed in 2008 Zava’s Spectrum-award-winning palladium and tourmaline pointed out the U.S. demand for necklace was strutted down the red carpet during the 83rd a metal with the attributes Academy Awards®, Feb. 27, 2011. The necklace earned First of palladium. Market Place in the Evening Wear category. Todd Reed’s palladium conditions at the time, cuff bracelet featuring a 22.40 ct. aquamarine gemstone dictated PAI slow accented with grey diamonds (6.90 ctw.) and white diamonds down marketing (2.20 ctw.) earned First Place in the Business/Day Wear efforts. Conditions category and Best in Show. have not only changed, they are PAI will be embarking on the most significant consumer and ripe for dramatic trade marketing initiatives in their history. Plans are underway growth. Driving for a media and marketing strategy that includes: consumer and r
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A significant push-pull strategy is slated to officially launch by Vivienne Westwood June 1, 2011 in the jewelry trade with multi-page placements Palladium Collection in INSTORE, InDesign and JCK magazines. PAI will have significant presence at all industry premier trade-shows and Pai sponsored a Vivienne events. Plans are underway to create opportunities for more Westwood “Get a Life” interaction and education for both designers and retailers at palladium jewelry collection all events. The new consumer campaign and launch begins which debuted recently in London September, 2011. and New York City showings. Pieces from the collection are featured on page 21.

*Dow Jones Newswire, March 15, 2011.

20 Oak Leaf Tiara

The Get a Life Palladium limited edition jewelry collection is comprised of both a couture and commercial line. Dame Vivienne Westwood’s bespoke pieces include elements inspired by the need to design the collection which is inspired by nature and from symbols of paganism - the acorn, the oak tree and the heart all feature prominently to represent strength, power and hope for change to Get a Life Bangle make the environment better for the future. Palladium bangle with engraved symbols and “Get a Life” logo Palladium belongs to a group of elements referred to as the platinum group and is a precious naturally white metal. Palladium is a rare, hard metal that is white by nature and is able to maintain its color and shape over time. Palladium is the contemporary metal of choice to be used in fine jewelry.

Get a Life is about how we stop climate change and Pagan Heart Necklace therefore preserve life for the next generation while Palladium chain necklace with heart pendant and Gaia inscription at the same time get a better life. My focus at the moment is what one person can do. Stop climate change. Save the planet. The acorn is symbolic of the rainforest, its importance and how it is our first duty to save it.”

Vivienne Westwood

Charm Ring Thin palladium with minature acorn bell charm 21 MARKETING UPDATE FOR CHINA AND JAPAN

China continued to lead the world in the production of palladium jewelry during 2010, consuming about 580,000 ounces. This was down from prior years as consumers turned to purchasing gold for investment rather than white metal jewelry. PAI has Palladium Alliance International (PAI) continued to market prepared and promote palladium jewelry in China, at the same reduced a comprehensive level of support and funding that Stillwater had put in place consumer oriented at the end of 2008. It should be quickly pointed out that promotional support and funding from Stillwater for PAI China marketing brochure to highlight initiatives has been increased for 2011 and includes funding palladium and palladium jewelry. The brochures are for initiatives in Japan as discussed below. distributed to consumers through PAI’s trade partners within the wholesale and retail sectors, covering the primary regions Given the relatively limited 2010 budget, PAI largely avoided in China where palladium jewelry is sold. using conventional commercial advertising in China and instead emphasized training within the jewelry trade and Not forgotten during 2010 was the importance of effective consumer education with regard to palladium jewelry. image advertising to the public and establishing and sustaining palladium jewelry as a fashion trend. PAI worked with PAI conducted an intensive retail sales training program renowned fashion magazines to make their readers aware of centered in Chengdu, Sichuan Province, a key region for the beauty and style offered in the latest palladium jewelry palladium jewelry sales. The training was conducted in lines. During the year, PAI introduced the PAI Palladium conjunction with the Gem and Jewelry Association of China Collection 2010, sculpted by a famous jewelry designer in (GAC) PAI’s strategic partner in this effort and the largest Japan. The Collection was well received and captured a lot of and most influential Chinese jewelry trade association. attention both in fashion and jewelry circles. Response within the jewelry industry was overwhelming and PAI will conduct similar training programs in other regions PAI’s work with the Japanese designer for the 2010 during 2011 utilizing the increased level of funding from Collection continued the partnership begun in creating its Stillwater. 2009 Collection. At the same time PAI began exploring the possibility of launching a high-end palladium jewelry offering in Japan in collaboration with renowned Japanese jewelry manufacturers and retailers.

After nearly two years of discussions and careful preparation, the first high-end Japanese collection of palladium jewelry was launched November 25th at the renowned Ginza Wako on Tokyo’s Ginza. This elegant collection is composed of necklaces, brooches, rings and pendants. The Japanese, long recognized as a style leader in fabricating platinum jewelry, have applied the same devotion, patience and technical skill in producing this first Japanese palladium jewelry collection.

The debut of the palladium jewelry collection at Ginza Wako received tremendous public recognition and has generated a lot of interest in palladium among the jewelry trade, the media and the Japanese public. In response, PAI has also prepared an educational brochure highlighting palladium aimed at consumers in Japan. These PAI palladium marketing efforts will continue during 2011.

22 GINZA WAKO PALLADIUM COLLECTION

Ginza Wako at Ginza Tokyo

23 2010 Market Developments

PALLADIUM COIN BILL PASSED the more accurate “Winged Liberty Dime”. The inscription “Liberty” appears above, with the letters widely spaced. The The authorizing legislation for the American Palladium Eagle motto “In God We Trust” appears before the front of Liberty’s coin provides instructions for specific obverse and reverse neck. The reverse of the Palladium Eagle will be a high relief designs to be used. Both are the work of the famous sculptor version of the 1907 American Institute of Architects Gold Adolph Alexander Weinman. “Close likenesses” of the designs Medal reverse. Weinman had designed the medal with help he created for a coin and medal are required to be used for from Charles McKim and George B. Post for the first year of the palladium bullion and collector coins. The obverse of the important architectural honor. the Palladium Eagle will feature a high relief version of the Mercury Dime obverse. This series was produced from 1916 A standing American Eagle with upraised wings is pictured to 1945 and represents one of Weinman’s most remembered pulling a laurel branch out of a rock with its beak. On the works. original medal, the rock included “AIA” and the name of the architect being honored. These inscriptions would presumably The full head of Liberty is pictured, facing left. She wears be removed for the new bullion and collectors coins. The a winged cap, which makes her appearance reminiscent of design bears similarities to the reverse of the Walking Liberty Mercury, the Roman god of trade profit and commerce. This Half Dollar, which was designed by Weinman for the led to the use of the common name “Mercury Dime” over circulating half dollar issued from 1916 to 1945

24 PHYSICALLYBACKED ETFS INTRODUCED IN THE UNITED STATES IN EARLY 2010

The most efficient way to gain exposure to changes in prices On January 8, 2010 ETF Securities began trading ETFS in natural resources is to actually buy and hold the physical Physical Platinum Shares (NYSE: PPLT) and ETFS Physical commodity. This strategy ensures near perfect correlation Palladium Shares (NYSE: PALL). As with gold and silver, with the spot price of the commodity as the value of the the new PGM ETFs are backed by physical assets in plate, holding moves in unison with market prices. A physical sponge and ingot form in a secure London Platinum approach only makes sense for commodities that 1) are non- Palladium Market-approved vault which will undergo a bi- perishable, 2) are easily stored, and 3) maintain high value-to- annual audit performed by an independent external bullion weight ratios. ETFs are designed to provide investors with this specialist auditor. option. And, physically-backed ETFs are essentially limited to precious metals funds that store bullion in secure vaults and These new ETF securities quickly proved very popular as can which had previously been limited to gold and silver. be seen from the charts below:

UNITED KINGDOM MAKES PALLADIUM HALLMARKING COMPULSORY BEGINNING 2010

London – July 23, 2009. The UK Hallmarking Act 1973 was r

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25 Stillwater Mine

STILLWATER MINE – LOOKING AHEAD diagram showing the planned mining areas for 2011. During 2001, the Off Shaft mining area was contained within one mile The basis for the ten-year plan provides for sustaining our of the main shaft, whereas today more than half of our mining current production profile while strengthening the developed occurs roughly three miles distant from the shaft. Operating state and upgrading infrastructure to mitigate receding face within a concentrated mining front would enable the implications. During this same period, we will be developing Company to maintain lower costs and higher productivities. growth opportunities to the east within our present land package, targeting the Blitz area. Additionally, operations have become increasingly scattered, so that haulage and service groups are now required to RECEDING FACE traverse distances of up to several miles in support of daily mining activities. The new Kiruna electric truck ramp has The Stillwater Mine began operations in 1996, some 25 years been designed to reduce the haulage load and will initially ago, and has undergone dramatic changes since that time. support Stillwater’s westward development below the 3200 Ongoing mining efforts have pushed our active mining front level and subsequent deeper and further to the west, expanding the Stillwater Mine production as new such that our operations now extend laterally more than five stoping areas come on miles east to west and vertically for more than one mile. line. In July of 2011, the Kiruna ramp will The long section views shown below illustrate in cross section begin to be extended the expansion of the Stillwater Mine over time. deeper into the mine and is expected to The active mining front in 2001 was effectively concentrated, 0OF
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26 by late 2015, providing increased haulage support for our sufficient ore reserves are found, two new ventilation raises to western mining operations. surface would be required to provide adequate ventilation in support of ore production from this area. Production rates from the Stillwater Mine are expected to remain flat until the Kiruna haulage system begins to Shown below is the Stillwater Mine with the Blitz Project area support mining activity in the far west via the 1400W highlighted in red on the right side. level. Complementing the Kiruna haulage system, our main shaft will be upgraded to achieve a 20% increase in hoisting As can be clearly seen in the above view, the Blitz Project capacity. Development will advance under the strategy of is a large target area which could add substantially to the consolidating mining activity into three primary areas (Off production potential of the Stillwater Mine in the future. Shaft, Upper West and Lower West – see the diagram on page 26). The current focus of the Blitz Project Team is (1) to transition from conceptual design to a project with the required level Once these milestones are achieved, there may be an of planning detail, (2) to review operating permits for any opportunity to increase mine production rates, contingent necessary modifications as required, (3) to evaluate the upon our ability to staff the operation at that time. At a proposed project for optimization opportunities, and (4) to minimum, this infrastructure strengthens our operational perform all necessary surface and underground rehabilitation foundation and will help to sustain the Stillwater Mine in the work prior to project implementation. years ahead. One consideration in the optimization assessment is the BLITZ PROJECT appropriate methodology to be employed in developing the Blitz 5000E level. There are two options being considered Stillwater Mining Company controls a considerable length at this point: using conventional drill and blast methods, of JM Reef strike to the east of our existing Stillwater Mine or installing a tunnel boring machine (TBM). The TBM operations, referred to as the Blitz area. Limited surface method has the advantage of requiring a different skill set drilling in this area suggests ore grades in the Blitz may be and somewhat leaner staffing than the conventional drill similar to those in the Off Shaft area of the Stillwater Mine. and blast method, which is the prevalent method utilized at The Company intends to develop this area over the course of the Stillwater Mine. the next few years in hopes of providing additional mill feed Staffing Blitz with material to sustain current production levels and potentially skilled miners for to grow production from the Stillwater Mine in the future. conventional drill- The Blitz project would be accessed from the 5000 level and-blast development east portal at the Stillwater Mine. A significant amount of would compete with rehabilitation will be required in preparation for this project. our own production This rehabilitation is scheduled to be completed by the staffing needs, making Tunnel Boring Machine being considered fourth quarter of 2011. The project is currently planned to the TBM option GPS
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27 East Boulder Mine

of our underground mine workings from period to period. EAST BOULDER MINE – MOVING FORWARD At the end of 2002, as depicted in the vertical cross-section immediately below, the extent of the initial active mine area The last two years have been exciting and challenging at the was confined to an area approximately 4,500 feet horizontally East Boulder Mine and have laid the foundation for our by 200 feet vertically. Ready access to production areas and future direction. During this period we have re-evaluated the the concentration of mining activities allowed for a simple relationship between mining and processing rates and such oversight structure, face to face communications, quick access other drivers as mining methods, organization roles, employee to shops and efficient rail-to-workplace delivery of supplies skillsets and shared responsibility in order to achieve and and removal of ore and waste material. maintain safe, low cost, sustainable production. By better understanding these relationships, we have successfully At the end of 2010, as depicted in the second diagram, a established strong production and infrastructure support that dramatic change has taken place in the mining footprint. The fits how we are organized and how we operate. Key to our mine area where production is either active or completed success over the next several years will be our ability to further extends nearly 9,000 feet horizontally by 1,500 feet vertically engage and empower our workforce toward continuing in dimension. Along with the expanded mining area, the improvements in efficiency. mining process has now become much more complex and requires carefully coordinating the horizontal and vertical RAPIDLY CHANGING MINE STATE transportation of workers, materials and mined ore and waste The series of pictures below show the actual progression rock. Average travel times to and from the working face have of mining at East Boulder from 2002 through 2010, along increased from about 30 minutes each way at the end of 2002 with a projection of the mining state in 2020. The goal is to to around 50 minutes at the end of 2010. provide a visual sense of the rapid expansion in the footprint

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28 Projecting forward from today another ten years to 2020, we support future production in this area. again will expect to see significant changes in the underground mining footprint. By 2020, the projected area shown in the We expect development of the Graham Creek project to third cross-sectional diagram below will have grown to about take about five years and to cost about $8 million. As the 16,000 feet horizontally by 2,000 feet vertically. Average travel TBM drive progresses, we will take the opportunity to do times to and from the workplace also will increase, averaging definitional drilling behind it, which should allow us to better one hour each way. Production mining in 2020 will have understand the grade and continuity of the JM Reef to the expanded out to the eastern edge of the recently announced west of our current operations. TBM development during Graham Creek project area. The tunnel-boring machine 2011 will include some work that we would consider part (TBM) development is nearing this area today. of East Boulder Mine’s normal 2011 budget, but by 2012 all new TBM footage to the west will be attributable to Graham The East Boulder mining operations projected in the pictures Creek. and discussion above assume that the mine will maintain a fixed production rate of approximately 130,000 ounces of Any decision as to whether the Graham Creek project will PGMs per year. Efforts over the next two years will focus allow us to grow the annual rate of production from the mine on expanding the mine’s proven reserve base, installing key or merely extend East Boulder’s mine life while maintaining infrastructure (ore and waste material handling systems, a current production levels will depend on several factors. We sand plant booster system as the elevation of mining increases, expect the grade and continuity of the PGM resource in ventilation raises to surface, etc.) and strengthening the skill the Graham Creek area to be similar to what we see in the base of our miners. Throughout this period we also will East Boulder Mine; to the extent they are better or worse, continue looking for opportunities to increase production and that could affect our mine sequencing. The other critical minimize the gradual rise in operating costs associated with element will be the availability of skilled miners – expanding the mine’s receding face and growing footprint. production at East Boulder Mine would require additional skilled miners, who generally are difficult to attract or develop. GRAHAM CREEK PROJECT And finally, the strength or weakness of PGM market prices could affect the financial resources available to support As PGM prices recovered during 2009 and 2010, we turned discretionary projects like Graham Creek. our attention toward incremental development/expansion opportunities that could provide new production going Our general expectation, however, is that the Graham Creek forward. One of the most attractive areas we identified lies project will allow us to increase proven and probable ore just to the west of the East Boulder Mine and can be accessed reserves available for mining in the western portion of the from the existing infrastructure at East Boulder. The project JM Reef at a comparatively modest capital cost. As such, envisions using an existing TBM to extend the mine’s main this project seems like a particularly attractive investment of travelway (the 6500 level) about 8,200 feet out toward the capital during a period when PGM prices are relatively strong. western extremity of the JM Reef. At that point, the surface Regardless of whether Graham Creek ultimately provides an topography drops down making it feasible to add a new increase in production rates or merely an extension of mining ventilation raise to surface – which would be required to life, we believe it will add significant value at very nominal cost.

The green outline denotes the Graham Creek Area Å West – East Æ

Planned TBM Drive ~8,200 Feet

29 Marathon Project

MARATHON PROJECT – GROWTH AND DIVERSIFICATION The Marathon PGM-Copper sulfide deposit is contained within the Eastern Gabbro Series (figure 2) of the Coldwell The acquisition of the Marathon PGM assets and the Benton Complex, a large intrusive body emplaced near the northern Resources Bermuda exploration properties in the fourth shores of Lake Superior. The Coldwell is a composite quarter of 2010 represented a significant advance toward magmatic intrusion and the largest alkaline intrusive complex achieving Stillwater’s near-term growth and diversification in North America. It is approximately 16 miles in diameter goals. The Marathon Copper-PGM project in northwest with a surface area of 224 square miles. The southern portion Ontario (figure 1) is an advanced stage development project of the Coldwell Complex extends beneath the waters of Lake undergoing permitting and preparations for detailed Superior. engineering and construction of a conventional open pit mining and processing operation. In combination with the The Marathon deposit occurs as a series of shallow-dipping Marathon Project, the adjoining Geordie Lake and Bermuda sub-parallel sulfide lenses that follow the basal gabbro exploration projects provide Stillwater with a large property contact and form distinct mineral horizons designated as portfolio of contiguous mining claims and Crown leases the Footwall, Main, Hanging Wall and W-Horizon (figure covering nearly sixty square miles along the most mineralized 3). Similar but less-explored accumulations of copper-PGM and geologically prospective portions of the Coldwell mineralization are also known to occur at Geordie Lake and Igneous Complex. along the basal gabbro contact as it continues to the northwest across the Bermuda property.

Figure 2

Bermuda

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LAKE SUPERIOR

Marathon PGM-Copper Project

Figure 1 30 Although the Marathon processing facilities deposit has a lower and support average PGM grade infrastructure. The than Stillwater’s present mine plan JM Reef, Marathon (figure 4) includes mineralization development of a includes a significant substantial main pit copper endowment, is and the sequential substantially thicker and Figure 3 mining from several outcrops at the surface satellite pits. As Main Mineral Zone - over 700 drill holes allowing application the planned life of EFöOF
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of significantly current Marathon Marathon Project lower cost open-pit ore reserves is about 11.5 years, an ambitious exploration mining methods. It is program is planned on the Geordie Lake and Bermuda anticipated that planned properties to ensure that additional mineral deposits will be Marathon operations timely defined and permitted to optimize their contribution will produce about to either an expanded production rate or extended life for

200,000 ounces of Figure 4 the planned Marathon PGM-Copper mining and processing PGMs annually at zero, operations. or negative cost, net of copper and other precious metal credits. Our expectation for the Marathon Development Project and adjacent exploration properties in Ontario is that, in Near term activities at Marathon include continued combination with the Blitz and Graham Creek projects in consultation with affected community and First Nations Montana, they will make a significant positive economic leaders, advancing the federal and provincial environmental contribution to Stillwater’s attractive growth and and socio-economic review process, and initiating detailed diversification story. engineering and design for construction of the mine,

Marathon Project looking South to Lake Superior

31 PGM Recycling

STILLWATER METALS COMPANY HAS BEEN RECYCLING After the spent catalyst material is crushed, it is pneumatically conveyed into Stillwater’s state-of-the-art precious metals SPENT CATALYST MATERIALS AT ITS SMELTING AND smelter. Here, it is blended with concentrate streams from the REFINING FACILITIES IN COLUMBUS MONTANA SINCE 1997 mines, allowing for improved efficiencies of processing. The material blend is fed into an electric-arc furnace, where within AND TO DATE HAS PROCESSED OVER TWO MILLION OUNCES a molten bath, the copper and nickel sulfides contained in OF PLATINUM AND PALLADIUM. THE FACILITIES PROCESS the mine concentrates form a heavy matte which collects the PGMs contained in the catalysts and separates from lighter CERAMIC AND METALLIC AUTOMOTIVE CATALYSTS, slag materials. The copper and nickel then “carry” the PGMs through the precious metals smelter and into the base metals PETROLEUM CATALYSTS, INDUSTRIAL PGM CATALYSTS, AND refinery (BMR), where the copper and nickel are extracted REFINERY SWEEPS IN LOT SIZES RANGING FROM TWO TO yielding a PGM-rich filter cake. The PGM-rich product from the BMR is shipped to outside refiners for final refining. TWENTY TONS. IN 2010 ALONE, THE FACILITIES PROCESSED RECYCLING SYSTEM UPGRADES NEARLY 400,000 OUNCES OF RECYCLED PGMS.

Catalytic converters vary widely in terms of their precious New Electric Furnace – In May 2009, a new electric furnace metals content, requiring all materials today to be settled was commissioned that provides Stillwater with improved strictly on assays. Stillwater employs state-of-the-art sampling efficiencies, increased processing capacity, and operating and analytical techniques that have been developed and redundancy in combination with the original electric furnace. refined over many years. These techniques provide accurate New Slag Cleaning Capability – During 2011, the Company and timely results for platinum, palladium and rhodium. is refurbishing its original electric furnace to provide both the Stillwater either purchases the materials to be recycled or operating redundancy and “slag-cleaning” capabilities where processes them on a tolling basis for a fee. A variety of slag from the new furnace will be further treated to accelerate hedging and financing alternatives are used to minimize price and enhance PGM recoveries. exposure and accelerate the turnaround of the suppliers’ working capital. New Sampling Plant – In 2010, Stillwater completed construction of a new state-of-the-art catalyst sampling The recycling of metals conserves natural resources, energy, facility where recycling lots are crushed and sampled prior and scarce landfill space. PGMs derived from recycling to processing. This new facility has increased Stillwater’s represent a significant and growing portion of worldwide receiving and sampling capacity four-fold, and provides the metals supply each year. These recycled metals will be required ability to receive product from multiple shippers. The facility to satisfy the increasingly stringent global emission standards efficiently provides assay samples ready for analysis in the new mandated by broadening regulations. automated assay lab. All materials received at Stillwater’s facility in Columbus are New Automated Recycle Lab – The addition of the dedicated recorded, documented and weighed. The PGM - bearing automated recycle laboratory, coupled with the new sampling ceramic materials in each lot are then crushed, homogenized plant, provides exchange quality assays within 7 to 10 days and sampled. Any dust created during this process is captured of receiving the material. The new laboratory concept and returned to the material for inclusion with the sample. underwent extensive technical testing for several years before Once sampling is completed, Stillwater’s new automated being completed and placed into operation in February 2011. recycle lab (ARL) provides state-of-the-art assay techniques New Fully Integrated System – With the sampling plant and that have been developed by one of the industry’s most automated laboratory fully functional, Stillwater is at the experienced laboratories for PGM-bearing materials. The ARL leading edge in the PGM recycling industry, providing the provides exchange quality assays within 7 to 10 days after the most efficient exchange quality assays available in the recycling material is delivered. This provides suppliers with the fastest market today. These facilities not only dramatically increase exchange quality assays in the market, allowing them to reduce current assay capacity and provide accelerated turnaround of the risks caused by lengthy traditional assay times. assays, but also lower the cost of producing assays, benefitting both Stillwater and its recycling suppliers.

32 RECYCLING HISTORY AT STILLWATER

1990 – Commissioned Smelter – 30 tpd 1994
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33 Operating Responsibly

Stillwater Mining Company Mission Statement

OPERATE RESPONSIBLY DEVELOP AND GROW POSITION COMPANY 1. Everyone goes home safe–every day 1. Create Shareholder Value 1. Respect for Employees 2. Environmental Stewardship 2. Fully utilize resources 2. Market Products/Services 3. Best Management Practices 3. Expand and diversify 3. Community Relationships 4. Operational Risk Assessments 4. Opportunity Awareness 4. Shareholder Communication 5. Foster Culture of Engagement 5. Reduce Risk Profile 5. Regulatory Compliance

Stillwater Mining Company is Committed to:

HEALTH AND SAFETY  ENVIRONMENTAL MANAGEMENT  Everyone Goes Home Safe, Every Day A Proactive Approach to Environmental Sustainability r
B est Safety Management Practices in eliminating hazards or exposures which could result in personal injuries or r
B est Environmental Practices going well beyond regulatory illnesses, fires, explosions, hazardous substance discharges, compliance, setting high standards for our operating property damage or security losses. facilities and focused on protection of natural resources. Work is progressing toward formalizing our environmental r

A Safe Work Environment beneficial to personal health, initiatives in a comprehensive environmental management mental alertness, and safety awareness patterned after the and audit system, enhancing our proactive approach. International Safety Rating System, industry practices and in full compliance with regulatory requirements. r

Environmental Innovation utilizing new technologies and initiatives to advance environmental and social r
Saf ety and Health Management Practices driven by responsiveness; including, state of the art water and waste leadership centered around our Safety and Health treatment, air emission controls, visual mitigation, interim Management System known as GET Safe, with which we reclamation design, wildlife enhancements and social Guide, Educate and Train employees to work safely and initiatives. Smelter emissions set the industry standard for effectively, integrating safety into everything we do. Daily “clean” as demonstrated by extremely low sulfur dioxide monitoring and procedural audits insure safety compliance. emissions. Critical Task Analysis is utilized to systematically examine and reengineer, as necessary, each work task. Specialized r

Recycling Waste Streams and Spent PGM training in loss control is employed as a critical element in Catalytic Materials Materials in order to conserve natural advancing safety excellence. resources while providing for a cleaner environment. r

Safety Effectiveness monitored by a Board level committee, r

Setting the Industry Standard with exemplary which reviews health and safety effectiveness and regulatory environmental management, unparalleled compliance compliance. Initiatives have been instrumental in consistent record, innovative technologies, forward-thinking initiatives safety improvement and in reducing reportable injury and a transparent and open approach to “neighboring” incidence rates. and public relations. Initiatives have been recognized by organizations representing the full spectrum of the r

Beyond Stillwater the Company is active in an initiative to environmental community from the U.S. Department of the create a culture of health and safety beyond our work place Interior to the Northern Plains Resource Council. using our expertise and management systems to assist other companies in developing safe work practices.

34 r
Environmental Effectiveness monitored by a Board level r
C ollaborative Community Relationships in which Company committee, which reviews environmental management development plans are shared and discussed, thereby effectiveness and regulatory compliance. providing the opportunity to address social and economic impacts in a collaborative way. r
Improving Energy Efficiency through evaluating and reducing energy consumption. The process is expected to provide r
M onitoring of Local Socio-economic Conditions to evaluate measures with which to compare our record to that of other our impact on local communities, to assist in the equitable precious metal mining companies. distribution of Montana Hard Rock Mine tax revenues based on employee place of residence and to provide COMMUNITY RELATIONSHIPS  resources to address future community needs. Collaborative Long-term Commitment and Sustainability r
Charitable Giving and Educational Support for community projects, cultural events, emergency services, youth activities, r
Social Accountability through our precedent-setting Good and education. College scholarships are available for Neighbor Agreement (GNA) which provides a framework dependants of employees and other qualifying students. for cooperation and public participation in the oversight of Charitable giving for the social and economic well being of our environmental compliance programs. Now in its 11th local communities is designed to enhance the quality of life year of implementation, the GNA builds trust between for employees, their families and the general neighboring participants through open communication and a process public. that enhances transparency.

Fish population survey in the East Boulder River

35 Form 10-K

36

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

FORM 10-K

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2010.

OR

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ______to ______

Commission File Number 1-13053

STILLWATER MINING COMPANY (Exact name of registrant as specified in its charter)

DELAWARE 81-0480654 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.)

1321 DISCOVERY DRIVE, BILLINGS, MONTANA 59102 (Address of principal executive offices and zip code)

(406) 373-8700 (Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED Common Stock, $0.01 par value The New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer (as defined in Rule 405 of the Securities Act). [X] YES [ ] NO

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. [ ] YES [X] NO

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X]YES [ ] NO

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES NO

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer [X] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). [ ] YES [X] NO

As of June 30, 2010, assuming a price of $11.62 per share, the closing sale price on the New York Stock Exchange, the aggregate market value of shares of voting and non-voting common equity held by non-affiliates was approximately $515.0 million.

As of February 9, 2011, the Company had outstanding 102,170,164 shares of common stock, par value $0.01 per share.

DOCUMENTS INCORPORATED BY REFERENCE

Certain information required in Part III of this Annual Report on Form 10-K is incorporated herein by reference to the registrant’s Proxy Statement for its 2011 Annual Meeting of Stockholders.

TABLE OF CONTENTS

GLOSSARY

PART I

ITEMS 1, 1A, AND 2 BUSINESS, RISK FACTORS AND PROPERTIES 7

ITEM 3 LEGAL PROCEEDINGS 48

PART II

ITEM 5 MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED 49 STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

ITEM 6 SELECTED FINANCIAL DATA 50

ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL 58 CONDITION AND RESULTS OF OPERATIONS

ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 77

ITEM 8 CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 79

ITEM 9A CONTROLS AND PROCEDURES 108

PART III

ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 109

ITEM 11 EXECUTIVE COMPENSATION 111

ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND 111 MANAGEMENT AND RELATED STOCKHOLDER MATTERS

ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, 111 AND DIRECTOR INDEPENDENCE

ITEM 14 PRINCIPAL ACCOUNTING FEES AND SERVICES 111

PART IV

ITEM 15 EXHIBITS, FINANCIAL STATEMENT SCHEDULES 111

SIGNATURES 116

GLOSSARY OF SELECTED MINING TERMS

The following is a glossary of selected mining terms used in the United States and Canada and referenced in the Form 10- K that may be technical in nature:

Adit A horizontal tunnel or drive, open to the surface at one end, which is used as an entrance to a mine.

Anorthosite Igneous rock composed almost wholly of the mineral plagioclase feldspar.

Assay The analysis of the proportions of metals in ore, or the testing of an ore or mineral for composition, purity, weight, or other properties of commercial interest.

Base metal refinery A processing facility designed to extract base metals such as copper and nickel from the product stream. The Company’s base metal refinery receives PGM-rich matte material from the smelter, chemically extracts copper, nickel, residual iron and small amounts of other minerals as by-products from the matte, and then ships the remaining filtercake material to third-party precious metal refiners for final processing.

Catalysts Catalysts are materials that facilitate one or more chemical reactions without being consumed in the reaction themselves. As referenced in this report, platinum group metals serve as catalysts within the catalytic converters used in automotive exhaust and pollution control systems and, where so indicated, within similar applications in petroleum refining or other chemical processes.

Close-spaced drilling The drilling of holes designed to extract representative samples (“cores”) of rock and assess the mineralization in a target area.

Concentrate A mineral processing product that generally describes the material that is produced after crushing and grinding ore, effecting significant separation of gangue (waste) minerals from the metal and/or metal minerals, and discarding the waste and minor amounts of metal and/or metal minerals. The resulting “concentrate” of metal and/or metal minerals typically has an order of magnitude higher content of metal and/or metal minerals than the beginning ore material.

Crystallize Process by which matter becomes crystalline (solid) from a gaseous, fluid or dispersed state. The separation, usually from a liquid phase on cooling, of a solid crystalline phase.

Cut-off grade The lowest grade of mineralized material that qualifies as ore in a given deposit. The grade above which minerals are considered economically mineable considering the following parameters: estimates over the relevant period of mining costs, ore treatment costs, smelting and refining costs, process and refining recovery rates, royalty expenses, by-product credits, general and administrative costs, and PGM prices.

Decline A gently sloped underground excavation constructed for purposes of moving mobile equipment, materials, supplies or personnel from surface openings to deeper mine workings or as an alternative to hoisting in a shaft for mobilization of equipment and materials between mine levels.

Dilution An estimate of the amount of waste or low-grade mineralized rock which will be mined with the ore as part of normal mining practices in extracting an ore body.

Diamond Drilling Diamond Drilling is a specialized form of boring holes typical during mineral exploration ventures which allows for the recovery of core for support of geologic characterization, grade determination and metallurgical testing.

Drift A major horizontal access tunnel used for the transportation of ore or waste.

Ductility Property of a solid material that undergoes more or less plastic deformation before it ruptures. The ability of a material to stretch without fracturing.

Fault A geologic fracture or a zone of fractures along which there has been displacement of the sides relative to one another parallel to the fracture.

2

Filter cake The PGM-bearing product that is shipped from the Company’s base metal refinery to a third- party toll refinery for the final extractive stages in the refining process.

Footwall The underlying side of a fault, ore body, or mine working; especially the wall rock beneath an inclined vein, fault, or reef.

Gabbro rocks A group of dark-colored igneous rocks composed primarily of the minerals plagioclase (See Mafic/Ultramafic) feldspar and clinopyroxene, with minor orthopyroxene.

Gangue material The non-metalliferous or waste metalliferous mineral in the ore.

Grade The average metal content, as determined by assay of a volume of ore. For precious metals, grade is normally expressed as troy ounces per ton of ore or as grams per metric tonne of ore.

Gram A metric unit measure used in the mining industry. Grades of precious metals for palladium, platinum, gold and silver for the Marathon Project are reported in grams/tonne. A gram is equal to about 0.032 troy ounces.

Hanging wall The overlying side of a fault, ore body, or mine working; especially the wall rock above an inclined vein, fault, or reef. (Compare “footwall.”)

Hectare A metric unit measure used in the mining industry. One hectare is equivalent to about 2.47 acres.

Hoist See shaft.

Jackleg drill A manually operated rock drill, generally powered by compressed air, used to drill holes for blasting rock and to install ground support hardware.

Kilometer A metric unit measure used in the mining industry. One kilometer is equivalent to about 0.62 miles.

Lenticular-shaped Resembling in shape the cross section of a double-convex lens.

Load-haul-dump A vehicle used underground to scoop up mined material and move it to a central collection or discharge point. Generally called an “LHD” by miners.

Lode claims Claims to the mineral rights along a lode (vein) structure of mineralized material on Federal land; typically in the U.S. lode claims are 1,500 feet in length and 600 feet wide along the trend of the mineralized material.

Mafic rocks Igneous rocks composed chiefly of dark, ferromagnesian minerals in addition to lighter- colored feldspars.

Matte See “PGM-rich matte”.

Matrix The finer-grained material between the larger particles of a rock or the material surrounding mineral particles.

Meter A metric unit measure used in the mining industry. One meter is equivalent to about 3.28 feet.

Mill A processing plant that produces a concentrate of the valuable minerals or metals contained in an ore. The concentrate must then be treated in some other type of plant, such as a smelter, to effect recovery of the pure metal. Term used interchangeably with concentrator.

Mill site claims Claiming of Federal land for mill site purposes or other operations connected with mining lode claims. Used for nonmineralized land not necessarily contiguous with the vein or lode.

Mineral beneficiation A treatment process separating the valuable minerals from the host material.

3

Mineralization The concentration of metals and their compounds in rocks, and the processes involved therein.

Mineralized material A mineralized body which has been delineated by appropriately spaced drilling and/or underground sampling to support a general estimate of available tonnage and average grade of metals. Such a deposit does not qualify as a reserve until a comprehensive evaluation based upon unit cost, grade, recoveries, and other material factors conclude legal and economic feasibility.

Mouat Agreement Mining and Processing Agreement dated March 16, 1984 regarding the Mouat family. The Mouat royalty stems back to the formation of Stillwater Mining Company at which time claims staked by the Mouats’ forebears in 1876 were leased to Stillwater Mining Company.

Net smelter royalty A share of revenue paid by the Company to the owner of a royalty interest generally calculated based on the imputed value of the PGM concentrate delivered to the smelter. At Stillwater Mining Company, royalties are calculated on the mineral production subject to each royalty as a percentage of the revenue received by the Company after deducting treatment, refining and transportation charges paid to third parties, and certain other costs incurred in connection with processing the concentrate at the Columbus smelter.

Norite Coarse-grained igneous rock composed of the minerals plagioclase feldspar and orthopyroxene.

Ore That part of a mineral deposit which could be economically and legally extracted or produced at the time of reserve determination.

Outcrop The part of a rock formation that appears at the earth’s surface often protruding above the surrounding ground.

PGM The platinum group metals collectively and in any combination of palladium, platinum, rhodium, ruthenium, osmium, and iridium. Reference to PGM grades for the Company’s mine operations include measured quantities of palladium and platinum only. References to PGM grades associated with recycle materials typically include palladium, platinum and rhodium.

PGM-rich matte Matte is an intermediate product of smelting; an impure metallic sulfide mixture made by melting sulfide ore concentrates. PGM rich matte is a matte with an elevated level of platinum group metals.

Probable Reserves for which quantity and grade and/or quality are computed from information similar (indicated) to that used for proven (measured) reserves, but the sites for inspection, sampling, and reserves measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven (measured) reserves, is high enough to assume continuity between points of observation.

Proven (measured) Reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, reserves workings or drill holes; grade and/or quality are computed from the results of detailed sampling; and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well established.

Recovery The percentage of contained metal actually extracted from ore in the course of processing such ore.

Reef A layer precipitated within the Stillwater Layered Igneous Complex enriched in platinum group metal-bearing minerals, chalcopyrite, pyrrhotite, pentlandite, and other sulfide materials. The J-M Reef, which the Company mines, occurs at a regular stratigraphic position within the Stillwater Complex. Note: this use of “reef” is uncommon and originated in South Africa where it is used to describe the PGM-bearing Merensky, UG2, and other similar layers in the Bushveld Complex.

Refining The final stage of metal production in which residual impurities are removed from the metal.

4

Reserves That part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination.

Recycling materials Spent PGM-bearing materials collected for reprocessing from automotive, petroleum, chemical, medical, food and other catalysts. Additionally, PGMs for recycling may be sourced from scrap electronics and thermocouples, old jewelry and materials used in manufacturing glass.

Scrubber A treatment system for industrial waste gases that extracts environmentally deleterious components prior to venting to the atmosphere. The Company’s scrubber system at the smelter and base metal refinery primarily removes sulfur dioxide – which is converted in the scrubber into environmentally benign gypsum (calcium sulfate) – and captures any particulates in the stack gas.

Shaft A vertical or steeply inclined excavation for the purposes of opening and servicing an underground mine. It is usually equipped with a hoist at the top which lowers and raises a conveyance for handling personnel and materials.

Slag Slag is a nonmetallic product resulting from the mutual dissolution of flux and nonmetallic impurities during smelting. A silica rich slag is a smelting slag that contains a relatively high level of silica.

Sill (1) With respect to a mine opening, the base or floor of the excavated area (stope); (2) With respect to intrusive rock, a tabular intrusive unit that is conformable with surrounding rock layers.

Slusher (1) An electric double-drum winch with two steel ropes attached to an open-bottomed scoop that transports (drags) ore from the rock face to a loading point, where the ore is discharged. (2) A very selective mining method in which small ore stopes are mined using a slusher.

Smelting Heating ore or concentrate material with suitable flux materials at high temperatures creating a fusion of these materials to produce a melt consisting of two layers with a slag of the flux and gangue (waste) minerals on top and molten impure metals below. This generally produces an unfinished product (matte) requiring refining.

Sponge A granular (shot) form of PGM. Commonly, the form required for manufacture of many PGM-based chemicals and catalysts.

Stope A localized area of underground excavation from which ore is extracted.

Strike The course, direction or bearing of a vein or a layer of rock.

Tailings That portion of the mined material that remains after the valuable minerals have been extracted.

TBRC A “top-blown rotary converter,” a rotating furnace vessel which processes PGM-rich matte received from the smelter furnace, removing iron from the molten material by injecting a stream of oxygen. This process converts iron sulfides into an iron oxide slag which floats to the surface for separation.

Tonne A metric unit measure used in the mining industry. One tonne is equal to about 1.1 short tons or 2204.6 pounds. Tonnages for the Marathon Project are reported in tonne.

Tolling Processing of material owned by others for a fee without taking title to the material.

Troy ounce A unit measure used in the precious metals industry. A troy ounce is equal to about 31.10 grams. The amounts of palladium and platinum produced and/or sold by the Company are reported in troy ounces. There are 12 troy ounces to a troy pound.

Ultramafic rocks Igneous rocks composed chiefly of dark, ferromagnesian minerals in the absence of significant lighter-colored feldspars.

5

Vein A mineralized zone having regular development in length, width and depth that clearly separates it from neighboring rock.

Wall rock The rock adjacent to, enclosing, or including a vein, layer, or dissemination of ore minerals. See “Hanging wall” and “Footwall” above.

6

PART I ITEMS 1, 1A, AND 2 BUSINESS, RISK FACTORS AND PROPERTIES

INTRODUCTION AND CURRENT OPERATIONS

Stillwater Mining Company (the Company) is engaged in the development, extraction, processing, refining and marketing of palladium, platinum and associated metals (platinum group metals or PGMs) from a geological formation in south central Montana known as the J-M Reef and from the recycling of spent catalytic converters. The J-M Reef is the only known significant primary source of platinum group metals inside the United States and one of the significant resources outside South Africa and Russia. Associated by-product metals at the Company’s operations include significant amounts of nickel and copper and minor amounts of gold, silver and rhodium. The J-M Reef is a narrow but extensive mineralized zone containing PGMs, which has been traced over a strike length of approximately 28 miles.

The Company conducts mining operations at the Stillwater Mine near Nye, Montana and at the East Boulder Mine near Big Timber, Montana. Ore extraction at both mines takes place within the J-M Reef. The Company operates concentrating plants at each mining operation to upgrade the mined production into a concentrate form. The Company operates a smelter and base metal refinery at Columbus, Montana which further upgrades the mined concentrates into a PGM-rich filter cake. The filter cake is shipped to third-party custom refiners for final refining before the contained PGMs are sold to third parties.

In the fourth quarter of 2010, the Company announced two new expansion projects along the J-M Reef. The first of these, known as the Blitz project, will develop new underground drifts on two levels from the current Stillwater Mine toward the eastern extremity of the reef. The other project, known as Graham Creek, will develop about 8,200 feet toward the west from the existing East Boulder Mine infrastructure, using a tunnel.

Besides processing mine concentrates, the Company also recycles spent catalyst material at the smelter and base metal refinery to recover the contained PGMs – palladium, platinum and rhodium. The Company currently has catalyst sourcing arrangements with various suppliers who ship spent catalysts to the Company for processing to recover the PGMs. The Company smelts and refines the spent catalysts within the same process stream as the mined production.

PGMs are rare precious metals with unique physical properties that are used in diverse industrial applications and in jewelry. The largest use for PGMs currently is in the automotive industry for the production of catalysts that reduce harmful automobile emissions. Besides being used in catalytic converters, palladium is used in jewelry, in the production of electronic components for personal computers, cellular telephones and facsimile machines, as well as in dental applications and in petroleum and industrial catalysts. Platinum’s largest use after catalytic converters is for jewelry. Industrial uses for platinum, in addition to automobile and industrial catalysts, include the manufacturing of data storage disks, fiberglass, paints, nitric acid, anti-cancer drugs, fiber optic cables, fertilizers, unleaded and high-octane gasoline and fuel cells. Rhodium, produced in the Company’s recycling operations and to a limited extent as a by-product from mining, also is used in automotive catalytic converters to reduce nitrogen oxides and in jewelry as a plating agent to provide brightness.

Through the end of 2010, the Company was party to a ten-year sales agreement with Ford Motor Company (Ford) that in recent years committed 80% of the Company’s mined palladium and 70% of its mined platinum for delivery to Ford. This agreement expired at the end of 2010. The expired Ford supply agreement included certain price floors and caps designed to limit the parties’ exposure to fluctuations in PGM market prices. Except for ounces priced at the floor or cap, the contract provided that metal deliveries were to be priced at a small discount to the trailing month’s average London price for PGMs.

Until July of 2009, the Company also had a supply agreement with General Motors Corporation (GM) that committed the Company to deliver 20% of its mined palladium each month to GM. The GM agreement also included a floor price and provided for a small discount to market on deliveries not affected by the floor price. On July 22, 2009, as part of the GM bankruptcy proceedings, the bankruptcy court approved a GM petition to reject its obligations under the supply agreement, thereby nullifying the agreement with retroactive effect from July 7, 2009.

Effective January 1, 2011, the Company has entered into a new three-year supply agreement with GM that provides for fixed quantities of palladium to be delivered to GM each month. The new agreement does not include price floors or caps, but provides for pricing at a small discount to a trailing market price. The specific commercial provisions of the

7 agreement are contractually confidential. The Company is continuing to negotiate potential supply arrangements with other large PGM consumers and in the meantime is selling its remaining mine production under month-to-month and spot sales agreements.

At December 31, 2010, the Company had proven and probable ore reserves at its Montana operations, of approximately 41.0 million tons with an average in-situ grade of 0.49 ounces of palladium and platinum per ore ton, containing approximately 19.9 million ounces of palladium and platinum at an in-situ ratio of about 3.57 parts palladium to one part platinum. At December 31, 2010, the Company had proven and probable ore reserves at its recently acquired Marathon Development Project in Ontario, Canada, of approximately 91.4 million tonnes with an average in-situ grade of 1.068 grams of palladium and platinum per ore tonne and 0.247% copper, containing approximately 3.1 million ounces of palladium and platinum at an in-situ ratio of about 3.53 parts palladium to one platinum and 498 million pounds of copper. See “Business, Risk Factors, and Properties — Proven and Probable Ore Reserves”.

2010 – In Review:

• The Company reported net income of $50.4 million, or $0.51 per diluted share, for the year ended December 31, 2010, compared to a net loss of $8.7 million, or $0.09 per diluted share, in 2009. Contributing to the net income in 2010 were higher PGM prices and recycling sales volumes, along with continued attention to controlling costs. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Year Ended December 31, 2010 Compared to Year Ended December 31, 2009.”

• In 2010, the Company’s mining operations produced a total of 485,100 ounces of palladium and platinum, 8.5% less than the 529,900 ounces produced in 2009. The lower ounce production was primarily attributable to lower realized ore grades than planned in the off-shaft portion of the Stillwater Mine. Total consolidated cash cost per ounce (a non- GAAP measure of extraction efficiency) averaged $397 in 2010, compared with $360 in 2009, due in part to the lower ore grades and ounces produced. Mine production for 2011 is projected at about 500,000 combined ounces of palladium and platinum. Total consolidated cash costs per ounce (a non-GAAP measure) for 2011 currently are projected to be slightly higher than 2010 at around $430 per ounce. See Part II, Item 6 “Selected Financial Data” for further discussion of non-GAAP measures.

• The Company’s revenues, in terms of dollars and ounces sold, for 2010, 2009 and 2008 were:

Year ended December 31, Sales Revenues Troy Ounces Sold (in thousands) Palladium Platinum Rhodium Other (1) Total Palladium Platinum Rhodium Other (3) Total

2010 Mine production $ 186,749 $ 166,313 $ 3,880 $ 24,102 $ 381,044 377 112 2 14 505 PGM recycling 36,893 95,911 30,470 5,338 168,612 81 62 13 - 156 Other (2) 6,222 - - - 6,222 13 - - - 13 Total $ 229,864 $ 262,224 $ 34,350 $ 29,440 $ 555,878 471 174 15 14 674

2009 Mine production $ 143,514 $ 139,733 $ 6,453 $ 17,192 $ 306,892 393 123 4 15 535 PGM recycling 14,947 45,736 18,666 2,439 81,788 53 40 9 - 102 Other (2) 2,679 3,028 45 - 5,752 12 3 - - 15 Total $ 161,140 $ 188,497 $ 25,164 $ 19,631 $ 394,432 458 166 13 15 652

2008 Mine production $ 163,433 $ 160,171 $ 16,474 $ 20,286 $ 360,364 399 115 2 19 535 PGM recycling 47,760 227,358 197,469 2,801 475,388 119 131 25 - 275 Other (2) 19,980 - - - 19,980 49 - - - 49 Total $ 231,173 $ 387,529 $ 213,943 $ 23,087 $ 855,732 567 246 27 19 859

(1) “Other” column includes gold, silver, nickel and copper by-product sales from mine production and revenue from processing recycling materials on a toll basis. (2) “Other” row includes sales of metal purchased in the open market. (3) “Other” column includes gold and silver by-product ounces sold. Not reflected in the “other” ounce column in the table above are approximately 1.2 million pounds of nickel and 0.8 million pounds of copper sold in 2010. Comparative sales in 2009 were approximately 0.9 million pounds and 0.8 million pounds of nickel and copper, respectively. Sales in 2008 included approximately 0.9 million pounds of nickel and approximately 0.9 million pounds of copper.

• Revenues from PGM recycling grew 106% during 2010, increasing to $168.6 million in 2010, from $81.8 million in 2009, a direct result of higher PGM prices and an increase in volumes processed. Recycled ounces sold in 2010 totaled 156,100 ounces, an increase of 53.0% compared to the 102,000 ounces sold in 2009. The Company’s combined average realization on recycling sales (which include palladium, platinum and rhodium) increased to

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$1,046 per ounce in 2010 from $779 per ounce in 2009, reflecting higher PGM prices. In addition to purchased material, the Company processed 235,900 ounces of PGMs on a tolling basis in 2010, up from 128,000 tolled ounces in 2009. Recycled volumes fed to the smelter totaled 399,400 ounces of PGMs in 2010, up 59.1% from 251,000 ounces in 2009; the result of higher availability of recycling materials in the market in 2010. Recycling volumes gradually strengthened as 2010 progressed. Working capital associated with recycling activities in the form of inventories and advances was $41.5 million and $29.0 million at December 31, 2010 and 2009, respectively. Total outstanding procurement advances to recycling suppliers totaled $6.1 million at December 31, 2010. The year-end advance balance reflects the write-down of $0.6 million and $0.5 million against advances on inventory purchases during 2010 and 2009, respectively.

• On November 30, 2010, the Company acquired the PGM assets of Marathon PGM Corporation, a Canadian exploration company, using $63.6 million in cash and 3.88 million Stillwater common shares. The transaction was valued at US$173.4 million (which included $36.0 million of deferred income tax liability assumed). In conjunction with this acquisition, on November 17, 2010, the Company established Stillwater Canada Inc., a wholly-owned Canadian subsidiary. The principal property acquired is a large PGM and copper deposit located near the town of Marathon, Ontario, Canada. The Marathon deposit is currently in the permitting stage and will not be in production for several years. Cost to develop the Marathon property is currently expected to be between $400 million and $450 million.

• On December 13, 2010, MMC Norilsk Nickel, the Company’s majority shareholder, announced that it had completed the sale through an underwritten offering to the public of all its equity interest in the Company. As a result, the Company’s public float of common shares more than doubled to about 101.9 million shares, sharply increasing the Company’s trading liquidity without any dilution of the existing shareholders. MMC Norilsk Nickel continues to hold $80 million of the Company’s 1.875% Senior Convertible Debentures due in 2028.

The Company’s 2010 capital expenditures for its existing operations totaled $50.3 million, an increase from $39.5 million in 2009. Capital spending in 2010 reflected an increase in development spending at the mines, purchases of equipment and completion of some critical infrastructure projects. Capitalized development expenditures for the operating mines totaled $32.2 million in 2010, up from $25.9 million in 2009. Major infrastructure projects during 2010 included completing a new recycling crushing and sampling facility in Columbus and work on the Kiruna electric truck system at the Stillwater Mine. In addition, the Company spent $137.1 million in cash and shares during 2010 to acquire the PGM assets (including a well defined project in Canada) of Marathon PGM Corporation, a Canadian exploration company. Capital spending in 2011 is budgeted at about $120 million, which reflects much higher spending on equipment replacement and mine development, plus substantial spending for improvements at the smelter in Columbus, development spending for the new Blitz and Graham Creek projects in the J-M reef, and continuing work at the Company’s Marathon PGM property in Canada. For a discussion of certain risks associated with the Company’s business, see “Business, Risk Factors and Properties – Introduction and Current Operations”, and “– Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

SAFETY

Mining operations are conducted at the Stillwater Mine and at the East Boulder Mine and involve the use of heavy machinery and drilling and blasting in confined spaces. The pursuit of safety excellence at the Company continues with the utilization since 2001 of the Company’s “G.E.T. (Guide, Educate and Train) Safe” safety and health management systems. Efforts are focused on accident prevention, seeking safer methods of mining and increased employee awareness and training. Areas of specific focus include enhanced work place examinations, safety standards implementation and compliance, accident/incident investigations, near miss reporting and use of loss control representatives who are part of the mining workforce. Employee-led focus teams have been successful in proactively solving many safety related challenges. The Company continues to use focus teams to address specific safety and health related issues. One of these areas in particular has been in the area of compliance with the Mine Safety and Health Administration (MSHA) diesel particulate matter (DPM) standards. At year end, the Company believes all underground operations are in compliance with these stringent standards through the use of blended bio-diesel fuels, post exhaust treatments, power train advances and high secondary ventilation standards.

During 2010, the overall Company reportable accident incidence rate improved to 3.65 versus 4.14 (measured as reportable incidents per 200,000 man-hours worked) at the end of 2009 while the severity rate remained essentially unchanged. The 2010 results equate to a 70% reduction in incidence rates for Company employees and contractors since the inception of the “G.E.T. Safe” safety management systems in 2001. The Stillwater Mine Concentrator was awarded the Large Metal/NonMetal Mill Group Sentinels of Safety Award for the State of Montana in 2010. This award was

9 presented for completing all of 2009 (133,586 manhours) without a lost time accident. The Sentinels of Safety program is administered by MSHA and recognizes outstanding safety performance throughout the nation. The metallurgical complex in Columbus, Montana, continued to maintain a low incidence rate while being recognized by the Montana Department of Labor and Occupational Safety and Health Administration (OSHA) as a leader in workplace safety.

The smelter, base metal refinery and analytical laboratory continue to participate in and support the Montana Department of Labor’s Safety and Health Achievement Recognition Program (SHARP). They have all received SHARP recognition numerous times. The smelter received a three year SHARP recognition in June of 2010. The base metal refinery and laboratory received SHARP recognition in 2009 and have completed the application process for a 2010 award and are awaiting the results.

The SHARP program recognizes employers who have demonstrated exemplary achievements in workplace safety and health. By meeting the SHARP inspection requirements, these facilities may be exempt from general OSHA inspections for one year. During 2010, employee participation and involvement was further enhanced through the continued implementation of internal safety auditing processes.

2011 – Looking Forward

The gradual recovery from the economic recession of 2008 and 2009 has seen demand for the Company’s principal metals, palladium and platinum, increase steadily from their recent lows. The price of palladium, which traded as low as $164 per ounce in December 2008, was quoted in London on the last trading day of 2010 at $797 per ounce. Similarly, platinum has recovered from an October 2008 low of $763 per ounce to $1,755 per ounce at year end 2010. The Company’s combined sales realization on mined palladium and platinum increased from an average of $498 per ounce for the fourth quarter of 2008 to $844 per ounce in the fourth quarter of 2010, a 69% increase. Even more to the point, at the quoted yearend prices, and absent the ceiling prices of the then expiring automobile contract, the Company’s combined sales realization price was at $1,015 per ounce. The stronger PGM prices appear to be the result of recovery in automotive demand in the Western economies, coupled with continued strong growth in automotive production in China and certain other emerging economies. Broadened investor interest in these metals following the introduction of palladium and platinum exchange-traded funds (ETFs) to U.S. investors in January 2010 may have also benefited prices.

From an operating perspective, the Company’s opportunity to increase production rapidly in response to higher prices is very limited as it is throughout the PGM industry. Production is constrained primarily by the developed state of the mines (i.e., the number and quality of working faces available for mining) and by limits on the availability of skilled manpower and equipment. The Company’s mine plans for 2011 contemplate production out of existing operations of about 500,000 ounces of palladium and platinum, slightly higher than actual production in 2010 but about in line with last year’s original mine plan. Total cash costs per ounce (a non-GAAP measure of mining efficiency) are projected to average about $430 per ounce in 2011, a little higher than the $397 experienced in 2010, reflecting anticipated cost inflation in materials and potential increases in labor costs. Prices for several key commodities (steel, fuel and explosives) used in mine production appear to be experiencing continued upward pressure. The Company’s labor agreement with the represented workforce at the Stillwater Mine and Columbus processing facilities will expire at the end of June 2011.

Recognizing the robust outlook for PGM pricing and the constraints on increasing production from the existing mines, in the fourth quarter of 2010 the Company announced two new development and potential expansion projects along the J-M reef. The first of these, known as the Blitz project, will develop new underground drifts on two levels from the current Stillwater Mine toward the eastern extremity of the reef, ultimately involving about 20,000 feet of new development on each level. As now contemplated, this development project will take about five years to complete and will cost about $68 million. The other project, known as Graham Creek, will develop about 8,200 feet toward the west from the existing East Boulder Mine infrastructure, using a tunnel boring machine that is already in place underground. This also is about a five-year project but, in view of the single drift and shorter distance, is only expected to cost about $8 million. Definition drilling as these new drifts progress should provide valuable information about the J-M reef in these largely unexplored regions. However, future ore production from these new areas will be contingent on developing new ventilation raises to surface adequate to support mining activities there.

During 2011, considerable effort also will be devoted to developing the recently acquired Marathon assets in Canada. Work on the principal Marathon resource will include putting a team in place to advance permitting and direct a detailed engineering study and ultimately to manage construction of the mine. A key focus during 2011 will be to advance the mine permitting process, working closely with Canadian federal and provincial agencies and the local communities to

10 develop a plan that addresses environmental concerns and ensures that the development there will be of continuing benefit to the region over the long term.

With the expiration of the Company’s supply agreement with Ford at the end of 2010, the Company is in discussions with various potential PGM customers for replacement supply agreements. As announced previously, a new three-year palladium sales agreement with GM was signed in December 2010, taking effect in January 2011. The new agreement does not include price floors or caps, but is based on fixed monthly delivery volumes and is priced based on the trailing month’s average market price less a small discount. Pending entering into other term agreements, the Company currently is selling its uncommitted mine production either on a spot basis or under month-to-month arrangements.

During 2011, the Company plans to strengthen its palladium marketing program, more than doubling its annual marketing budget and seeking to coordinate with others in promoting palladium for jewelry applications. Spending in this area had been reduced during the economic downturn but will now be expanded both in scale and in scope. While palladium is already well established as a jewelry metal in many Asian markets, it is not as widely recognized among European and North American consumers. Marketing programs in 2011 will reach out to these markets to broaden familiarity and strengthen palladium’s image in the retail arena.

Efforts at longer-term diversification will also continue during 2011. In addition to the acquisition of the Marathon PGM assets in 2010, on December 16, 2010, the Company announced that it had entered into a definitive agreement pursuant to which the Company will acquire some adjacent properties in the Coldwell Complex from Benton Resources Corp., another Canadian exploration company in 2011. During 2010, the Company also exercised an option to purchase a 15% interest in Marathon Gold Corporation, successor to the non-PGM assets that Marathon PGM held prior to the acquisition which includes a gold discovery in Newfoundland that they have announced. Exploration efforts on the Marathon PGM properties will continue in 2011 in order to determine if the extent of the currently defined ore body can be extended, either at depth or to the west, and to further evaluate other property interests as the result of the Marathon and Benton transactions. The Company is focused on PGM opportunities but given the rarity of PGMs has also considered gold, silver, copper and nickel projects, or projects with a combination thereof, in its quest for growth and diversification.

HISTORY OF THE COMPANY

Mineral exploration in the Stillwater Complex dates from at least the late nineteenth century, with early mining activities – primarily for chromium – beginning in the 1920s. Palladium and platinum were discovered within the Stillwater Complex, by geologists from Johns Manville Corporation (Manville) in the early 1970s, in what then became known as the J-M Reef. In 1979, a Manville subsidiary entered into a partnership agreement with Chevron U.S.A. Inc. (Chevron) to develop PGMs discovered in the J-M Reef. Manville and Chevron explored and developed the Stillwater property and commenced commercial underground mining in 1986.

Stillwater Mining Company was incorporated in 1992 and on October 1, 1993, Chevron and Manville transferred substantially all assets, liabilities and operations at the Stillwater property into the Company, with Chevron and Manville each receiving a 50% ownership interest in the Company’s stock. In September 1994, the Company redeemed Chevron’s entire 50% ownership. The Company subsequently completed an initial public offering in December 1994 and Manville sold a portion of its shares through the offering, reducing its ownership percentage to approximately 27%. In August 1995, Manville sold its remaining ownership interest in the Company to a group of institutional investors. The Company’s common stock is publicly traded on the New York Stock Exchange (NYSE) under the symbol “SWC”.

On June 23, 2003, the Company completed a stock transaction with MMC Norilsk Nickel (Norilsk Nickel), whereby a subsidiary of Norilsk Nickel became a majority stockholder of the Company. On that date, the parties entered into a Stockholders Agreement governing the terms of Norilsk Nickel’s investment in the Company. As of December 31, 2009, Norilsk Nickel controlled approximately 51.5% of the Company’s outstanding common shares and held $80 million of the Company’s $166.5 million outstanding 1.875% convertible debentures maturing in 2028. As noted above, in December 2010, Norilsk Nickel announced that it had disposed of its entire equity interest in the Company through an underwritten offering to the public of the Stillwater shares.

In November 2010, the Company announced that it had completed the acquisition of the PGM assets of Marathon PGM Corporation, a Canadian exploration company. The principal asset acquired in the transaction is a significant PGM- copper resource position in Ontario near the north shore of Lake Superior. In December 2010, the Company announced

11 its intent to further consolidate its position in this district by signing a definitive agreement to purchase some adjacent mineral properties held by Benton Resources Corp., another Canadian exploration company.

STILLWATER AND EAST BOULDER MINES

Project Location

The Stillwater Complex, which hosts the J-M Reef ore deposit, is located in the Beartooth Mountains in south central Montana. It is situated along the northern edge of the Beartooth Uplift and Plateau, which rise to elevations in excess of 10,000 feet above sea level. The plateau and Stillwater Complex have been deeply incised by the major drainages and tributaries of the Stillwater and Boulder Rivers down to elevations at the valley floor of approximately 5,000 feet.

Geology of the JM Reef

Geologically, the Stillwater Layered Igneous Complex is composed of a succession of ultramafic to mafic rocks derived from a large complex magma body emplaced deep in the Earth’s crust an estimated 2.7 billion years ago. The molten mass was sufficiently large and fluid at the time of emplacement to allow its chemical constituents to crystallize slowly and sequentially, with the heavier mafic minerals settling more rapidly toward the base of the cooling complex. The lighter, more siliceous suites crystallized more slowly and also settled into layered successions of norite, gabbroic and anorthosite suites. This systematic process resulted in mineral segregations being deposited into extensive and relatively uniform layers of varied mineral concentrations.

The uniquely PGM-enriched J-M Reef and its characteristic host rock package represent one such layered sequence. The geosciences community believes that the PGM-enriched suite and other minerals characterizing the J-M Reef accumulated at the same time and by the same mechanisms of formation as the rocks enclosing them. Over time, the orientation of a portion of the original horizontal reef and layered igneous complex was faulted an estimated 20,000 feet to the northeast and was tilted upward at angles of 50 to 90 degrees to the north by the Beartooth Uplift. Localized faulting and intrusive mafic dikes are also evident along the 28-mile strike length of exposed Stillwater Complex. The impact of these structural events is localized along the J-M Reef and affects the percent mineable tonnage in an area, create additional dilution, or result in below cut-off grade and barren zones within the reef. The impacts on ore reserves of these events are quantified in the percent mineable discussion under “Proven and Probable Ore Reserves.” The upper portion and exposed edge of the uplifted reef complex were eroded forming the lenticular-shaped surface exposure of the Stillwater Complex and J-M Reef package evident today.

The J-M Reef package has been traced at its predictable geologic position and with unusual overall uniformity over considerable distances within the uplifted portion of the Stillwater Complex. The surface outcrops of the reef have been examined, mapped and sampled for approximately 28 miles along its east-southeasterly course and over a known expression of over 8,200 feet vertically. The predictability of the J-M Reef has been further confirmed in subsurface mine workings of the Stillwater and East Boulder Mines and by over 37,000 drill hole penetrations.

The PGMs in the J-M Reef consist primarily of palladium, platinum and a minor amount of rhodium. The reef also contains significant amounts of nickel and copper and trace amounts of gold and silver. Five-year production figures from the Company’s mining operations on the J-M Reef are summarized in Part II, Item 6, “Selected Financial Data.”

Ore Reserve Determination

As of December 31, 2010, the Company’s total proven palladium and platinum ore reserves were 4.6 million tons at an average grade of 0.54 ounces per ton, containing 2.5 million ounces of palladium and platinum. This represented a net decrease of 3.2% in proven contained ounces compared to the proven ore reserves reported as of December 31, 2009. The Company’s total probable palladium and platinum ore reserves at December 31, 2010, were 36.2 million tons at an average grade of 0.49 ounces per ton, containing 17.4 million ounces of palladium and platinum. Probable reserve contained ounces declined by 3.7% from those reported at December 31, 2009. Combined, the Company’s total proven and probable palladium and platinum ore reserves as of December 31, 2010, were 40.8 million tons at an average grade of 0.49 ounces per ton, containing 19.9 million ounces of palladium plus platinum - a net decrease of 3.6% in total proven and probable contained ounces from the 20.6 million ounces reported as of December 31, 2009.

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Methodology

The Company utilizes statistical methodologies to calculate ore reserves based on interpolation between and projection beyond sample points. Interpolation and projection are limited by certain modifying factors including geologic boundaries, economic considerations and constraints imposed by safe mining practices. Sample points consist of variably spaced drill core intervals through the J-M Reef obtained from drill sites located on the surface and in underground development workings. Results from all sample points within the ore reserve area are evaluated and applied in determining the ore reserve.

For proven ore reserves, distances between samples range from 25 to 100 feet but are typically spaced at 50-foot intervals both horizontally and vertically. The sample data for proven ore reserves consists of survey data, lithologic data and assay results. Quality Assurance/Quality Control (QA/QC) protocols are in place at both mine sites to test the sampling and analysis procedures. To test assay accuracy and reproducibility, pulps from core samples are resubmitted and compared. To test for sample label errors or cross-contamination, blank core (waste core) samples are submitted with the mineralized sample lots and compared. The QA/QC protocols are practiced on both resource development and production samples. The resulting data is entered into a 3-dimensional modeling software package and is analyzed to produce a 3-dimensional solid block model of the resource. The assay values are further analyzed by a geostatistical modeling technique (kriging) to establish a grade distribution within the 3-dimensional block model. Dilution is then applied to the model and a diluted tonnage and grade are calculated for each block. Ore and waste tons, contained ounces and grade are then calculated and summed for all blocks. A percent mineable factor based on historic geologic unit values is applied and the final proven reserve tons and grade are calculated.

Two types of cut-off grades are recognized for the J-M Reef, a geologic cut-off boundary and an economic cut-off grade. The geologic cut-off boundary of 0.3 and 0.2 troy ounces of palladium plus platinum per ton at the Stillwater Mine and the East Boulder Mine, respectively, is an inherent characteristic of the formation of the J-M Reef and is used for calculation of the proven and probable reserves. The economic cut-off grade is lower than the geologic cut-off and can vary between the mines based on cost and efficiency factors. The determination of the economic cut-off grade is completed on a round by round basis and is driven primarily by excess mill capacity and geologic character encountered at the face. See “Proven and Probable Ore Reserves – Discussion” for reserve sensitivity to metal pricing.

Probable ore reserves are based on longer projections, up to a maximum radius of 1,000 feet beyond the limit of existing drill hole sample intercepts of the J-M Reef obtained from surface and underground drilling. Statistical modeling and the established continuity of the J-M Reef as determined from results of 25 years of mining activity to date support the Company’s technical confidence in estimates of tonnage and grade over this projection distance. Where appropriate, projections for the probable ore reserve determination are constrained by any known or anticipated restrictive geologic features. The probable reserve estimate of tons and grade is based on the projection of factors calculated from adjacent proven reserve blocks or from diamond drilling data where available. The factors consist of a probable area, proven yield in tons per foot of footwall lateral, average grade and percent mineable. The area is calculated based on projections up to a maximum of 1,000-feet; the proven yield in tons per foot of footwall lateral and grade are calculated based on long-term proven ore reserve results in adjacent areas; and the percent mineable is calculated based on long-term experience from actual mining in adjacent areas. Contained ounces are calculated based on area divided by 300 (square feet) times proven yield in tons per foot of footwall lateral times grade (ounces per ton) times percent mineable (%).

The Company reviews its methodology for calculating ore reserves on an annual basis. Conversion, an indicator of the success in upgrading probable ore reserves to proven ore reserves, is evaluated annually as part of the reserve process. The annual review examines the effect of new geologic information, changes implemented or planned in mining practices and mine economics on factors used for the estimation of probable ore reserves. The review includes an evaluation of the Company’s rate of conversion of probable reserves to proven reserves.

The proven and probable ore reserves are then modeled as a long-term mine plan and additional factors including process recoveries, mining methods, metal prices, mine operating productivities and costs and capital estimates are applied to determine the overall economics of the ore reserves.

SEC Guidelines

The United States Securities and Exchange Commission (SEC) have established guidelines contained in Industry Guide No. 7 to assist registered companies as they estimate ore reserves. These guidelines set forth technical, legal and economic criteria for determining whether the Company's ore reserves can be classified as proven and probable.

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The SEC's economic guidelines have not historically constrained the Company's ore reserves, and did not constrain the ore reserves at December 31, 2010. Under these guidelines, ore may be classified as proven or probable if extraction and sale result in positive cumulative undiscounted cash flow. The Company utilizes both the historical trailing twelve- quarter average combined PGM market price and the current PGM market price in ascertaining these cumulative undiscounted cash flows. In testing ore reserves at December 31, 2010, the Company applied the trailing twelve-quarter combined average PGM market price of about $624 per ounce, based upon the twelve-quarter average palladium price of about $381 per ounce and the twelve-quarter average platinum price of about $1,464 per ounce.

The Company believes that it is appropriate to use a long-term average price for measuring ore reserves, as such a price better matches the period over which the reserves will ultimately be mined. However, should metal prices decline substantially from their present level for an extended period, the twelve-quarter trailing average price might also decline and could result in a reduction of the Company’s reported ore reserves.

The Company’s board of directors has established an Ore Reserve Committee, which met three times during 2010 with management who also met with outside experts to review ore reserve methodology, to identify best practices in the industry and to receive reports on the progress and results of the Company’s mine development efforts. The Committee has reviewed the Company’s ore reserves as reported at December 31, 2010, having met with management and with the Company’s independent consultant on ore reserves.

Results

The December 31, 2010, ore reserves were reviewed by Behre Dolbear & Company, Inc. (Behre Dolbear), third party independent consultants, who are experts in mining, geology and ore reserve determination. The Company has utilized Behre Dolbear to carry out independent reviews and inventories of the Company’s ore reserves since 1990. Behre Dolbear has consented to be a named expert herein. See “Business, Risk Factors and Properties – Risk Factors – Ore Reserves Are Very Difficult to Estimate and Ore Reserve Estimates May Require Adjustment in the Future; Changes in Ore Grades, Mining Practices and Economic Factors Could Materially Affect the Company’s Production and Reported Results.”

The Stillwater Mine proven and probable ore reserves at year-end 2010 decreased by 4.1% in terms of ore tons from those reported at year-end 2009. The East Boulder Mine proven and probable ore reserves at year-end 2010 decreased by 1.9% in ore tons from those reported at year-end 2009. Overall, the Company’s estimated proven and probable ore reserves based on ore tons decreased by 0.5% in 2010. The Company’s ore reserve determination for 2010, calculated at December 31, 2010, was limited by geologic certainty and not by economic constraints.

PROVEN AND PROBABLE ORE RESERVES

The Company’s proven ore reserves are generally expected to be extracted utilizing existing mine infrastructure. However, additional infrastructure development will be required to extract the Company’s probable ore reserves. Based on the 2011 mining plans at each mine, the year-end 2010 proven ore reserves of 2.6 million tons at the Stillwater Mine and 2.1 million tons at the East Boulder Mine represent an adequate level of proven ore reserves to support planned mining activities.

The grade of the Company’s ore reserves, measured in combined platinum and palladium ounces per ton, is a composite average of samples in all reserve areas. As is common in underground mines, the grade mined and the recovery rate achieved varies depending on the area being mined. In particular, mill head grade varies significantly between the Stillwater and East Boulder mines, as well as within different areas of each mine. During 2010, 2009 and 2008, the average mill head grade for all tons processed from the Stillwater Mine was 0.50, 0.56 and 0.51 PGM ounces per ton of ore, respectively. During 2010, the average mill head grade for all tons processed from the East Boulder Mine was about 0.39 PGM ounces per ton of ore compared to an average mill head grade of 0.38 PGM ounces per ton of ore in 2009 and 2008. Concentrator feeds at both mines typically include, along with the ore, some PGM-bearing material that is below the cut-off grade for reserves (reef waste) but that is economic to process so long as there is capacity available in the concentrator.

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As of December 31, 2010, 2009 and 2008 the Company’s proven and probable ore reserves were as follows:

2010 2009 2008

AVERAGE CONTAINED AVERAGE CONTAINED AVERAGE CONTAINED TONS GRADE OUNCES TONS GRADE OUNCES TONS GRADE OUNCES (000's) (OUNCE/TON) (000'S) (000's) (OUNCE/TON) (000'S) (000's) (OUNCE/TON) (000'S) Stillwater Mine (2) Proven Reserves 2,559 0.64 1,648 2,606 0.66 1,712 2,911 0.65 1,898 Probable Reserves 13,116 0.62 8,176 13,748 0.63 8,688 14,030 0.64 8,911 Total Proven and Probable Reserves (1) 15,675 0.63 9,824 16,354 0.64 10,400 16,941 0.64 10,809

East Boulder Mine (2) Proven Reserves 2,059 0.41 848 2,036 0.43 867 2,066 0.45 935 Probable Reserves 23,064 0.40 9,199 22,607 0.41 9,347 19,202 0.45 8,717 Total Proven and Probable Reserves (1) 25,123 0.40 10,047 24,643 0.41 10,214 21,268 0.45 9,652

T otal Company Reserves (2) Proven Reserves 4,618 0.54 2,496 4,642 0.56 2,579 4,977 0.57 2,833 Probable Reserves 36,180 0.49 17,375 36,355 0.50 18,035 33,232 0.53 17,628 Total Proven and Probable Reserves (1) 40,798 0.49 19,871 (3 ) 40,997 0.50 20,614 38,209 0.54 20,461

(1) Reserves are defined as that part of a mineral deposit that could be economically and legally extracted or produced at the time of the reserve determination. Proven ore reserves are defined as ore reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of ore reserves are well- established. Probable ore reserves are defined as ore reserves for which quantity and grade and/or quality are computed from information similar to that used for proven ore reserves, but the sites for inspection, sampling, and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven ore reserves, is high enough to assume continuity between points of observation. The proven and probable ore reserves reflect variations in the PGM content and structural impacts on the J-M Reef. These variations are the result of localized depositional and structural influences on the distributions of economic PGM mineralization. Geologic domains within the reserve boundaries of the two mines include areas where as little as 0% and up to 100% of the J-M Reef is economically mineable. The ore reserve estimate gives effect to these assumptions. See “Business, Risk Factors and Properties – Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Factors That May Affect Future Results and Financial Condition.”

(2) Expressed as palladium plus platinum in-situ ounces at a ratio of approximately 3.57 parts palladium to 1 part platinum. The Stillwater Mine is at a 3.54 to 1 ratio and the East Boulder Mine is 3.60 to 1.

(3) Average mining and processing losses of approximately 16.9% must be deducted from the reported contained ounces estimated to arrive at the estimated saleable ounces.

Discussion

The Company’s total proven and probable ore reserve tonnage at December 31, 2010, increased by about 6.8% or 2.6 million tons over the past two years. However, total contained ounces in proven reserves decreased by about 11.9% from those reported December 31, 2008. In 2010, proven and probable tons decreased 0.5% and contained ounces decreased by 3.6% from those reported December 31, 2009. In 2009, proven and probable tons increased 7.3% while contained ounces slightly increased by 0.7% from those reported December 31, 2008. The Company’s mine development efforts over the past several years have focused on converting probable reserves to proven reserves, rather than on adding new probable reserves.

Changes in proven and probable ore reserves are due to the net effect of:

• Additions to proven ore reserves from new definition drilling, • Deletions as proven reserves are mined, • Deletions from probable ore reserves as areas are converted by new drilling from probable to proven ore reserves, • Additions from development activity to convert mineralized inventory to probable ore reserves, • Additions and deletions from adjustments to ore reserve estimation factors and mine planning criteria. The cut-off grade used in mine planning is 0.3 ounces of platinum and palladium per ton for the Stillwater Mine and is 0.2 ounces of platinum and palladium per ton for the East Boulder Mine. The economic value of this cut-off grade varies with platinum and palladium prices and with the different mining methods employed, their costs and their efficiency.

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The Company’s production levels for palladium and platinum are driven by the number of ore tons mined, the mill head grade of the ore and the metallurgical recovery percentages. The Company measures its net mine production in terms of the number of ounces contained in the mill concentrate, adjusted for subsequent processing losses expected to be incurred in smelting and refining. The Company defines an ounce of metal as “produced” at the time it is transferred from the mine and received at the concentrator. Depletion, depreciation and amortization costs are inventoried at each stage of production.

Reserve to Market Price Sensitivity

25

20

15

10

5

PGM (Pd + Pt) Reserve Ounces (Millions) Reserve PGM (Pd + Pt) 0 $350 $400 $450 $500 $550 $600 $650 $700 $750

12 Quarter Weighted Average Palladium & Platinum Prices

The graph above provides a general indication of the sensitivity of the Company’s ore reserves to the long-term weighted average price of platinum and palladium, assuming the relative proportions of the two metals realized at the Company’s mines. It is based on the mine plan and model the Company uses to measure reserve economics, and reflects some reductions in capital spending at lower price levels where reserves are economically constrained. It does not provide for any adjustments to the planned mining sequence or to the mix of mining methods at lower prices, but instead is derived from a single planning scenario. As such, it should be regarded as indicative rather than definitive.

The economic analysis of proven and probable reserves at the end of 2010 identified that at a palladium and platinum combined price of about $530 per ounce the stated level of reserves would begin to be reduced by economic constraints. This combined price at which ore reserves become constrained by economics has increased from $400 per ounce in the analysis performed in 2009 and $517 per ounce shown in 2008. The variation in these threshold prices reflects year-on- year changes in mining costs, current development and production method assumptions, adjustments to ore grade and mine plans, and economic performance due to changing market prices during those periods. The Company has not tested the ore reserves beyond the level shown above because of the expense of accessing and drilling to establish ore reserves and because of the extensive life of a 19.9 million ounce reserve.

MARATHON DEVELOPMENT PROJECT

Location

The Marathon PGM-Cu project (the “project”) is located 10 kilometers (km) north of the town of Marathon, Ontario. The project site is in an area characterized by typical boreal vegetation, moderate to steep hilly terrain and numerous streams, ponds and shallow lakes. The project area is bounded to the east by the Pic River and Lake Superior to the south-west. The climate of this area is typical of northern areas within the Canadian Shield, with long winters and short, warm summers.

The project area is conveniently situated in close proximity to population centers, the Trans-Canada Highway, electrical transmission corridor, rail lines, Great Lake port facilities and a regional airport. 16

Project Description

The Marathon PGM-Cu project is an advanced stage development project undergoing preparations for the construction and commercial commissioning of a conventional open pit mining and processing operation. The planned operations will be owner-operated employing its own equipment and workforce.

Near term project activities include detailed engineering, design and construction of the mine, processing facilities and support infrastructure. The present mine plan includes development of a substantial main pit and the sequential mining of several smaller satellite pits. Mineral resources and ore reserves were determined in an independent study performed by a third party and documented in a January 8, 2010 report: “Technical Report on the Updated Feasibility Study for the Marathon PGM-Cu Project, Marathon, Ontario, Canada”. Proven and probable reserves total 91 million tonnes grading 0.246% copper and 1.07 g/t Pd+Pt. Planned operations include mining and processing at a nominal rate of 22,000 tonnes per day for a mining life of approximately 11.5 years.

The project will require an estimated 300 workers during the construction phase and 130 to 250 permanent full time positions during the life of mine operations. Approximately three spin-off jobs (suppliers, contractors) will result in the region for each full time position.

The PGM-copper ores will be processed (crushed, ground and concentrated) at on-site processing facilities to produce a marketable concentrate product containing copper, palladium, platinum, rhodium, silver and gold. The concentrate will be transported off-site via road and rail to a commercial smelter and refinery for subsequent metal extraction and separation. The residual material or “process solids” resulting from the milling process will be deposited in the Process Solids Management Facility (PSMF). Multiple sites within the project area have been evaluated as potential locations for the PSMF of which two preferred sites are undergoing final consideration and environmental assessment. The non-ore bearing mine rock produced, will be permanently stored in purposefully built Mine Rock Storage Areas (MRSAs) located west and east of the main pit.

Incremental reclamation activities are planned throughout the operation’s life. At final closure, and upon the completion of an end of life closure plan, the Company will have secured and remediated the project site to a condition facilitating sustainable future or traditional use by the local and First Nations communities.

Stillwater Canada Inc. is continuing with baseline environmental and socio-economic studies and is engaged with federal, provincial regulatory ministries and First Nation communities to secure the required permits and approvals for mine construction and operation. In December 2008, the project was accepted under the Major Projects Management Office (MPMO) initiative. A formal project description was submitted to the Canadian Environmental Assessment Agency (CEAA) in March 2010, which triggered the Federal Environmental Assessment (FEA) process. On October 7, 2010, the project was referred to an independent review panel. All federal and provincial approvals are anticipated in 2013 allowing commencement of commercial production in 2014.

Geology of the Marathon Deposit

The Marathon PGM-Cu deposit is hosted by the Eastern Gabbro Series of the Proterozoic Coldwell Complex, a large intrusive body that intrudes and bisects the Archean aged Schreiber-Hemlo Greenstone Belt. The Coldwell is a composite magmatic intrusion and the largest alkaline intrusive complex in North America. It is approximately 25 km in diameter with a surface area of 580 square kilometers. The Coldwell Complex was emplaced in three nested intrusive cycles introduced sequentially during cauldron subsidence near where the northern end of a regional-scale fault system intersected Archean rocks, near the north shore of Lake Superior.

Mineralization at the Marathon PGM-Cu deposit is related to a large magmatic system consisting of three or more cross-cutting intrusive olivine gabbro units that comprise the Eastern Gabbro Series of the Coldwell Complex. In order of intrusion, the three gabbroic units consist of Layered Gabbro Series, Layered Magnetite Olivine Cumulate (LMOC) and Two Duck Gabbro (TD Gabbro). Late quartz syenite and augite syenite dikes cut all of the gabbros but form a minor component of the intrusive assemblage. The TD Gabbro is the dominant host rock for copper-PGM mineralization and is a principal focus of exploration in the district. The mineralized zones occur as shallow dipping sub parallel lenses that follow the basal gabbro contact and form distinct mineral horizons designated as Footwall, Main, Hanging Wall and W- Horizon. The Main Zone is the thickest and most continuous zone. Additional accumulations of copper-PGM mineralization are associated with LMOC and occur in the hanging wall of the deposit.

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Mineral Resource & Reserve Estimate

Resource and reserve estimates were determined by an independent study performed by a third party effective November 2009. The mineral resource model used to estimate the mineral resources applied the same pit optimization, pit design, production scheduling and diluted block model used for the January 2010 updated technical report and feasibility studies. Only material in the block model with the resource classification of ‘measured’ or ‘indicated’ were considered as potential mill feed. In addition to the estimated grade values for Cu, Pd, Pt, Au, Ag, and Rh contained within the diluted block model, other variables were calculated or input into the diluted block model. These included the net smelter return, geotechnical parameters, block economic net value, haulage simulation results, block material type, and whittle rock types. In order to complete an open pit design on the Marathon PGM-Cu deposit, the following data, criteria and procedures were used:

• The available geotechnical data describing the inter ramp slope angle, slope sectors, and berm widths that are required to develop a geotechnically stable pit design; • Economic and metallurgical criteria such as estimated metal pricing, metal recoveries, downstream operating costs (smelting, refining, and shipping), currency conversion rates, and projected annual mill feed requirements; and • Pit optimization based on the economic, metallurgical, geotechnical and production requirements for the project. Pit optimization was completed using a Lerchs-Grossmann algorithm (LG) on the block model. GEMCOM’s LG software, the Whittle optimizer was selected. Once a pit optimization was completed, the selected pit shell was used as a design basis for the open pit.

Proven & Probable Reserve Estimate

For the Marathon PGM-Cu deposit, three major mining areas are present; the North pit, the South pit and the Malachite pit. Once the three pit areas were designed, a production schedule was then prepared, followed by equipment selection and estimation of operating costs, capital costs and personnel requirements. Mineral reserves have been estimated for the North, South and Malachite pits from the diluted block model, pit optimization and pit design. The mineral reserves are summarized in the table below:

Pd Pt Au Cu Ag Cu Pd Pt Au Ag Classification Tonnes (g/ t ) (g/t) (g/ t ) (%) (g/t) (Mlb) (oz 000) (oz 000) (oz 000) (oz 000)

Proven 76,461,000 0.910 0.254 0.090 0.268 1.464 452 2,237 625 222 3,600 Probable 14,986,000 0.435 0.147 0.060 0.138 1.318 46 209 71 29 635

Total 91,447,000 0.832 0.237 0.085 0.247 1.440 497 2,447 696 251 4,235 The mineral reserve estimate presented in the table above is effective as of November 24, 2009. The estimated ounces of proven and probable reserves include mining losses but do not include processing losses. Table tonnages are reported in metric tonnes.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company reviews and evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Impairment is considered to exist if total estimated future cash flows on an undiscounted basis are less than the carrying amount of the asset. The estimation of future cash flows takes into account estimates of recoverable ounces, PGM prices (long-term sales contract prices and historical pricing trends or third party projections of future prices rather than prices at a point in time as an indicator of longer-term future prices), production levels, and capital and reclamation expenditures, all based on life-of-mine plans and projections. If the assets are impaired, a calculation of fair market value is performed, and if fair market value is lower than the carrying value of the assets, the assets are reduced to their fair market value.

The Company determined that there was no material event or change in circumstances requiring the Company to test its long-lived assets for impairment at December 31, 2010, or December 31, 2009. However, during the latter part of 2008, in view of a steep decline in metals prices during that year, the Company concluded that the economic circumstances in which the Company operates had changed significantly. Therefore, at the end of 2008, the Company assessed whether total estimated undiscounted future cash flows at the Stillwater and the East Boulder Mines would be sufficient to recoup the carrying amount of each asset. Based on the mine plans as of December 31, 2008, and an

18 assessment of long-term pricing, the Company determined that undiscounted future cash flows at the Stillwater Mine were sufficient to return the carrying value, but the undiscounted future cash flows projected at the East Boulder Mine were not sufficient to cover the carrying value there. Consequently, with the assistance of Behre Dolbear, the Company assessed the fair value of the East Boulder Mine assets at December 31, 2008, and concluded that a valuation adjustment was needed at East Boulder. Accordingly, the Company recorded a $67.3 million charge against earnings at December 31, 2008, reducing the carrying value of the East Boulder Mine assets to $161.4 million at that date.

Assumptions underlying future cash flows are subject to certain risks and uncertainties. Any differences between projections and actual outcomes for key factors such as PGM prices, recoverable ounces, and/or the Company’s operating performance could have a material effect on the Company’s ability to recover the carrying amounts of its long-lived assets and so could potentially lead to impairment charges in the future.

CURRENT OPERATIONS

The Company’s operations are located in south central Montana. The Company conducts mining and milling operations at the Stillwater Mine near Nye, Montana and at the East Boulder Mine south of Big Timber, Montana. Both mines are located on mine claims that follow the apex of the J-M Reef. The Company operates a smelter and base metal refinery, and recycling facilities at Columbus, Montana.

Montana Properties and Facilities – February 2011

The Company’s original long-term development strategy and certain elements of its current planning and mining practices on the J-M Reef ore deposit were founded upon initial feasibility and engineering studies conducted in the 1980’s. Initial mine designs and practices were established in response to available technologies and the particular characteristics and challenges of the J-M Reef ore deposit. The Company’s current development plans, mining methods and ore extraction schedules are designed to provide systematic access to, and development of, the ore deposit within the framework of current and forecast economic, regulatory and technological considerations as well as the specific characteristics of the J-M Reef ore deposit. Some of the challenges inherent in the development of the J-M Reef include:

• Surface access limitations (property ownership and environmental sensitivity); • Topographic and climatic extremes involving rugged mountainous terrain and substantial elevation differences; • Specific configuration of the mineralized zone (narrow – average width 5 feet, depth – up to 1.5 miles of vertical extent, and long – approximately 28 miles in length), dipping downward at an angle varying from near vertical to 38 degrees; • A deposit which extends both laterally and to depth from available mine openings, with travel distances underground from portal to working face of up to six miles; and • Proven and probable ore reserves extending for a lateral distance of approximately 32,000 feet at the Stillwater Mine and approximately 12,500 feet at the East Boulder Mine — a combined extent underground of approximately 8.4 miles, with active underground travelways and ramps on multiple levels totaling more than 85 miles in extent that must be maintained and supported logistically.

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2010 Safety Performance

Safety performance at the Company’s mining operations falls under the regulatory jurisdiction of the U.S. Mine Safety and Health Administration (MSHA). MSHA performs detailed quarterly inspections at each of the Company’s mine sites and separately investigates any occurrences deemed to pose a significant hazard to employee health and safety. The Company cooperates fully with MSHA in its compliance responsibilities and maintains its own safety management system to ensure that no employee is put at risk in carrying out his or her job responsibilities and unsafe conditions are identified and remediated immediately.

MSHA enforcement powers include a broad range of alternatives, including issuing citations for violations of mandatory health or safety standards under the Federal Mine Safety and Health Act of 1977 (the Mine Act), elevated citations for violations that could significantly and substantially contribute to a safety or health hazard, 104(b) withdrawal orders for failure to abate a violation, 104(d) orders for unwarrantable failure of a mine operator to comply with mandatory health or safety standards, 110(b)(2) citations for flagrant violations of the Mine Act, and 107(a) imminent danger withdrawal orders. In addition, MSHA has authority to put on notice or close mining operations that demonstrate a continuing pattern of violations of the Mine Act and to impose criminal penalties on mine operators who fail to address violations of mine health and safety standards.

In legislation signed into law on July 21, 2010, publicly traded mining companies are required to disclose certain statistics pertaining to their compliance with the Mine Act. The table below includes these statistics for the full year 2010. For each mine site, the numbers listed below are numbers of actual issuances of citations/orders except for proposed assessment dollar values.

Section Section Section Section Assessment Legal 104 (S&S) 104 (b) 104 (d) 107 (a) (in 000's) Actions

Stillwater M ine 58 - 1 2 (1) $ 187 10

East Boulder Mine 26 - - -$ 34 2 (1) The 107(a) imminent dangers orders have been vacated and dismissed pursuant to settlement motions filed with the Federal Mine Safety and Health Review Commission on November 18, 2010, and January 24, 2011, and Administrative Law Judge’s Decisions Approving Settlement dated January 5, 2011, and January 25, 2011.

For the year ended December 31, 2010, none of the Company’s mines received written notice from MSHA of (i) a flagrant violation under section 110(b)(2) of the Mine Act; (ii) a pattern of violations of mandatory health or safety standards that are of such nature as could have significantly and substantially contributed to the cause and effect of other mine health or safety hazards under section 104(e) of the Mine Act; or (iii) the potential to have such a pattern. During the year ended December 31, 2010, the Company experienced no fatalities at any of its mines.

As of December 31, 2010, the Company had a total of 12 matters pending before the Federal Mine Safety and Health Review Commission. This includes legal actions that were initiated prior to the three months ended December 31, 2010, and which do not necessarily relate to the citations, orders or proposed assessments issued by MSHA during such twelve-month period.

The Company believes that the ultimate disposition of these alleged Mine Act violations and the pending legal dockets before the Commission will not have a material adverse effect on the Company's business, financial condition, results of operations or liquidity.

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EMPLOYEES

The following table indicates the number of Company employees (excluding contractors) in the respective areas:

Number of Employees SITE at December 31, 2010 2009 2008 Stillwater Mine 850 797 869 East Boulder Mine 280 265 261 Smelter and Refinery Complex 169 158 169 Administrative Support 55 53 65 Total 1,354 1,273 1,364

All of the Company’s hourly employees at the Stillwater Mine, the East Boulder Mine, the smelter and the base metal refinery are represented by the United Steelworkers of America (USW). The Company is party to a four-year labor agreement expiring on July 1, 2011, that covers substantially all hourly workers at the Stillwater Mine, the smelter and the base metal refinery and provides for annual wage increases of approximately 3.5% per annum. Separately, the labor contract covering all hourly workers at the East Boulder Mine is due to expire on July 1, 2012. See “Business, Risk Factors and Properties – Risk Factors - Limited Availability of Additional Mining Personnel and Uncertainty of Labor Relations May Affect the Company’s Ability to Achieve Its Production Targets.”

STILLWATER MINE

The Company conducts underground mining operations at its wholly-owned Stillwater Mine, near Nye, Montana. The Stillwater Mine facility accesses, extracts and processes PGM ores from the eastern portion of the J-M Reef using mine openings located in the Stillwater Valley. In addition, the Company owns and maintains ancillary buildings that contain the concentrator, shop and warehouse, changing facilities, headframe, hoist house, paste plant, water treatment, storage facilities and office. All surface structures and tailings management facilities are located within the 2,475 acre Stillwater Mine Operating Permit area. Ore reserves developed at the Stillwater Mine are controlled by patented mining claims either leased or owned outright by the Company. The mine is located approximately 85 miles southwest of Billings, Montana, and is accessed by a paved road. The mine has adequate water and power from established sources. See “Business, Risk Factors and Properties – Risk Factors – Uncertainty of Title to Properties – The Validity of Unpatented Mining Claims is Subject to Title Risk.”

The Stillwater Mine accesses and has developed a 5.9-mile-long underground segment of the J-M Reef, between the elevations of 2,000 and 7,300 feet above sea level. Access to the ore at the Stillwater Mine is accomplished by means of a 1,950-foot vertical shaft and by a system of horizontal adits and drifts driven parallel to the strike of the J-M Reef at vertical intervals of between 150 feet and 300 feet. Seven main adits have been driven from surface portals on the west and east slopes of the Stillwater Valley at various elevations between 5,000 and 5,900 feet above sea level. Several additional principal levels have been developed below the 5,000-foot level down to the 3,200-foot elevation, accessed from the vertical shaft and the associated shaft ramp system. Ore from this region of the mine is hauled by truck and/or rail to the shaft, where it is crushed and hoisted out of the mine. The Company is continuing to develop a decline system below the 3,200-foot elevation to access and develop deeper areas in the central part of the mine below those currently serviced by the existing shaft. At the end of 2010, this decline system extended down to the 2,000 foot level.

The 1,950-foot vertical shaft was constructed between 1994 and 1997 as part of the Company’s plan to increase output from 1,000 to 2,000 tons of ore per day and was sunk adjacent to the concentrator (starting at the 5,000-foot elevation) to increase efficiency of the operation. Ore and any waste rock to be transported to the surface from the off- shaft and deeper areas of the mine are crushed prior to being hoisted up the shaft. The production shaft and underground crushing station reduce haulage times and costs, facilitate the handling of ore and waste and improve the grinding capabilities of the concentrator. Ore from above the 5,000-foot west elevation is hauled to the surface by rail. Waste material not used for backfilling in underground excavations is transported to the surface and placed in permitted waste rock disposal sites.

The Stillwater Mine currently uses its 30 footwall lateral drifts and 6 primary ramps and vertical excavations to provide personnel and equipment access, supply haulage and drainage, intake and exhaust ventilation systems, muck haulage, backfill plant access, powder storage and/or emergency egress. The footwall lateral and primary ramp systems

21 will continue to provide support for production and ongoing development activities. In addition, certain mine levels are required as an integral component of the ventilation system and serve as required intake and/or exhaust levels, or as parallel splits to maintain electrical ventilation horsepower balance and to meet MSHA requirements. MSHA regulations require the Company to designate alternate (secondary) escapeways from mine workings. These levels, in addition to comprising critical functional components of the ventilation and escapeway system, serve as permanent mine service and utility infrastructure for road and rail transportation, dewatering and backfill pumping facilities. They have been designed and are intended to be used for the life of the mine.

During 2007, the Company began construction of a second major decline ramp from the 3,500 level of the existing shaft with eventual development down to about the 1,900-foot elevation. The first-phase installation of the Kiruna electric trucks at Stillwater Mine that will provide more efficient ramp haulage from the deeper portions of the off shaft area – a long-term project – is now nearly complete and should open up more mining alternatives in that part of the mine. In the future, the Company expects to install a horizontal rail haulage system on the 2,000 foot level to transport ore and waste material from the deeper mining faces to the electric truck ramps.

Prior to 1994, almost all of the Company’s mining activities utilized captive cut-and-fill stoping methods. This is a manpower-intensive mining method that extracts the ore body in eight to ten foot high horizontal cuts within the reef, accessed from vertical raises and mined with conventional jackleg drills and slushers. The open space created by the extraction of each cut is backfilled with waste rock and coarse concentrator tailings and becomes the floor for the next level of mining as the process moves upward. Commencing in 1994, the Company introduced two mechanized mining methods: ramp-and-fill and sub-level stoping. Ramp-and-fill is a mining method in which a series of horizontal cuts are extracted from the ore body using mobile equipment. Access to the ore body is from ramps driven within or adjacent to the ore body allowing the use of hydraulic drills and load-haul-dump equipment. Sub-level stoping is a mining method in which blocks of the reef approximately 50 feet high and up to 75 feet in length are extracted in 30-foot intervals utilizing mobile long-hole drills and remote control rubber tired load-haul-dump equipment. The reef is mined in a retreat sequence and mined out areas are filled with development waste or sand backfill as appropriate. Traditionally, captive cut-and-fill has been viewed as being more selective in nature than either ramp-and-fill or sub-level stoping, but it also requires miners with special skills and is generally less productive. Other factors considered in determining the most appropriate mining method for each area include the amount of ancillary development required as well as the ore grade and ground conditions expected. The Company determines the appropriate mining method to be used on a stope-by-stope basis utilizing an engineering and economic analysis.

The Company processes ore from the Stillwater Mine through a surface concentrator facility (mill) adjacent to the Stillwater Mine shaft. The mill has a permitted design capacity of 3,000 tons per day. During 2010, an average of 1,951 tons of ore and 187 tons of sub-grade material were processed through the mill per calendar day. In addition, on average the mill processed 108 tons per calendar day of smelter slag. Crushed ore is fed into the concentrator, mixed with water and ground to slurry in the concentrator’s mill circuits to liberate the PGM-bearing sulfide minerals from the rock matrix. Various reagents are added to the slurry, which then is agitated in a froth flotation circuit to separate the valuable sulfides from the waste rock. In this circuit, the sulfide minerals are successively floated, recycled, reground and refloated to produce a concentrate suitable for further processing. The flotation concentrate, which represents approximately 1.5% of the original ore weight, is filtered, placed in large bins and then transported by truck 46 miles to the Company’s metallurgical complex in Columbus, Montana. In 2010, 51% of the tailings material from the mill was returned to the mine and used as fill material to provide support for additional mining activities. The balance was placed in tailings containment areas on the surface. No additional steps are necessary to treat any tailings placed back into the mine or into the impoundments, as they are environmentally inert. Tailings are disposed of into the impoundment areas pursuant to the Company’s operating permits. Mill recovery of PGMs is historically about 92%. During 2008, failure of a critical drive gear on part of the fine grinding circuit caused recoveries to temporarily drop down to the 91% range.

In 1998, the Company received an amendment to its existing operating permit providing for the construction of a lined surface tailings impoundment that would serve the Stillwater Mine for approximately the next 30 years. This facility, located about eight miles from the mine and generally referred to as the Hertzler impoundment, was placed into operation in late 2000. See “Business, Risk Factors and Properties – Current Operations – Regulatory and Environmental Matters – Permitting and Reclamation”.

During 2010, the Stillwater Mine produced 351,700 ounces of palladium and platinum, 10.7% below the 393,800 ounces produced in 2009. This lower 2010 production was attributable to several factors, including a safety initiative that diverted miners for a time into remedial ground control efforts, an unplanned loss of a power center that took several key stopes off line for about a month, and generally lower than anticipated realized ore grades in the off-shaft portion of the

22 mine. The Stillwater Mine’s total cash costs (a non-GAAP measure) averaged $380 per ounce in 2010 compared to $344 per ounce in 2009. These total cash costs are net of recycling and by-product sales credits – without the benefit of these credits, Stillwater Mine’s total cash costs would have averaged $458 per ounce in 2010 and $397 per ounce in 2009. Analysis of this 10.4% increase in average costs (net of credits) indicates the higher 2010 cost per ounce was almost entirely attributable to the lower ounces produced in 2010 at the Stillwater Mine. See Part II, Item 6, “Selected Financial Data” for further discussion of non-GAAP measures.

EAST BOULDER MINE

The East Boulder Mine is located in Sweet Grass County, Montana, approximately 32 miles southeast of the town of Big Timber and is accessed by a public road. The East Boulder Mine is fully permitted independently of the Stillwater Mine and comprises a second distinct mining operation accessing the western portion of the J-M Reef. The mine consists of underground mine development and surface support facilities, including a concentrator, shop and warehouse, changing facilities, storage facilities, office and tailings management facility. All mine facilities are wholly owned and operated by the Company. Surface facilities for the East Boulder Mine are situated on unpatented mill site claims maintained on federal lands located within the Gallatin National Forest and administered by the U.S. Forest Service. All surface facilities, including the tailings management complex, are located within a 980 acre operating permit area. Proven and probable ore reserves for the mine are controlled by patented mining claims owned by the Company. Development of the East Boulder Mine began in 1998, and it commenced commercial production effective January 1, 2002.

From the surface facilities at East Boulder, the J-M reef is accessed by two 18,500-foot long, 15-foot diameter horizontal adits driven into the mountain. These adits are equipped with rail haulage and intersect the ore body at an elevation 6,450 feet above sea level. Within the mine, the ore body currently is developed from seven levels of horizontal footwall lateral drifts driven parallel to the J-M Reef totaling approximately 37,500 feet in length, and from four primary ramps totaling approximately 16,815 feet of development. The ore body is accessed vertically by ramp systems tying together the footwall laterals and driven approximately every 2,500 feet along the length of the deposit. During 2010, active mining areas were consolidated into seven production zones including two areas below the primary 6,450 haulage level.

The mined ore is transported horizontally out of the East Boulder Mine by rail haulage to the mine portal, where it is processed through the East Boulder concentrator facility, which has a permitted mill capacity of 2,000 tons per day. Concentrates produced in the mill are transported approximately 75 miles to the Company’s metallurgical complex in Columbus, Montana.

In 2010, approximately 50% of the East Boulder mine tailings material was returned to the mine and used for backfill in mined out voids to provide a foundation upon which additional mining activities can occur. The balance was placed in surface tailings containment areas. In 2009, approximately 44% of the mine tailings were returned to the mine; sandfill activity was reduced significantly in the 2009 mine plan. No additional steps are necessary to treat any tailings placed back into the mine or into the impoundments, as they are environmentally inert, and tailings placed into the impoundment areas are disposed of pursuant to the Company’s operating permits. The current impoundment area has an estimated staged life of approximately 20 years at the original planned production and processing rate of 2,000 tons per day. Mill recovery of the PGMs contained in the ore was about 89% in 2010 and 2009 and 90% in 2008.

The East Boulder Mine’s total cash costs (a non-GAAP measure) were $442 per ounce in 2010 compared to $407 per ounce in 2009. These total cash costs include the benefit in each period of recycling and by-product credits – if these credits are excluded, the resulting cash costs would have been $539 per ounce in 2010 and $471 per ounce in 2009. The higher average cash costs per ounce in 2010 were driven mostly by higher labor and materials costs, coupled with the effect of lower ounces produced at the mine. See Part II, Item 6 “Selected Financial Data” for further discussion of non- GAAP measures.

EXPLORATION AND DEVELOPMENT

The J-M Reef has been explored from the surface along its entire 28-mile strike length by surface sampling and drilling which consists of an array of over 900 drill holes. Exploration activities historically also included driving and then drilling from two exploratory underground adits not currently in active use, the West Fork Adit and the Frog Pond Adit. Comprehensive evaluation of PGM mineralization encountered in the J-M Reef has allowed delineation of indicated ore reserves adjacent to the Stillwater and East Boulder Mines and confirmation of the existence of mineralized material over much of the remaining strike length. Exploration to date has defined sufficient probable ore reserves to

23 sustain mining for a number of years in the future. It is the Company’s practice to systematically convert its established probable ore reserves to the proven ore category as mine development progresses by performing definition drilling and evaluation coincident with planned advances of underground development.

A key element of the Company’s development activities in the Stillwater Complex consists of ongoing efforts to convert its established probable ore reserves into proven ore reserves by extending the lateral and vertical development of the Stillwater and East Boulder Mines. These ongoing activities involve constructing and extending mine development workings to access established ore reserves and continuously advancing definition drilling, engineering and mine plans to replace depleted ore reserves. During 2010, 2009 and 2008, $32.2 million, $25.9 million and $55.9 million, respectively, were incurred in connection with capitalized mine development and are included in total capital expenditures. Development spending in 2011 is planned to be about $60.3 million, which should offset the effect of reduced development spending in 2009 and 2010 as well as providing for reserve replacement.

The following table outlines measures that are used by the Company to gauge progress on resource development activities:

Location and Development Activity 2010 2009 2008 Stillwater Mine New Primary Development (equivalent feet)(1) 19,666 12,323 25,047 New Footwall Lateral (equivalent feet)(1) 9,983 8,430 10,836 New Definition drilling (feet) 291,173 292,701 358,761 East Boulder Mine New Primary Development (equivalent feet)(1) 3,539 3,602 9,963 New Footwall Lateral (equivalent feet)(1) 2,362 1,522 4,254 New Definition drilling (feet) 81,474 64,448 140,944 (1) Based on one linear foot of excavation, 11 feet wide by 12 feet high (cross-section of 132 ft.2).

In addition to the development spending planned at the existing mines, about $10 million of spending is planned in 2011 for the two separate development projects along the J-M reef – the Blitz project adjacent to the Stillwater Mine and the Graham Creek project to the west of the East Boulder Mine. These projects are intended to provide access to two promising but largely unexplored segments of the reef and may ultimately allow the Company to expand or extend its mine production. The Company has also planned about $10 million of capital spending in 2011 for detailed engineering and other projects on the recently acquired Marathon PGM properties in Canada (see the COLDWELL COMPLEX below).

The Company has established an exploration team that will coordinate drilling and evaluation efforts on the Marathon properties. This team of experienced geologists may also pursue other exploration opportunities in the future, with particular emphasis on Canada.

COLDWELL COMPLEX

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In November 2010, the Company announced that it had completed the acquisition of the PGM assets of Marathon PGM Corporation, a Canadian exploration company. The principal asset acquired in the transaction is a significant PGM- copper resource position in Ontario near the north shore of Lake Superior. In December 2010, the Company announced its intent to further consolidate its position in this district by signing a definitive agreement to purchase some adjacent mineral properties held by Benton Resources Corp., another Canadian exploration company.

The Marathon PGM-copper project is located 10 km north of the town of Marathon, Ontario located on the eastern margin of the Coldwell Complex, a Proterozoic layered intrusion. The palladium, platinum and copper mineralization occurs in the Two Duck Lake gabbro. The known zones of significant mineralization have a total north-south strike length of about 3 km and dip 30° to 40° toward the west. The mineralization has a true thickness ranging from 4 meters (m) to 100m.

The town of Marathon is situated adjacent to the Trans-Canada Highway on the northeast shore of Lake Superior, approximately 300 km east of the city of Thunder Bay. The Marathon project benefits from excellent location and access to well-developed transportation infrastructure. The project site is in an area characterized by dense vegetation, moderate to steep hilly terrain with a series of streams, ponds and small lakes. The project area is bounded to the east by the Pic River and Lake Superior to the southwest. The climate of this area is typical of northern areas within the Canadian Shield, with long winters and short, warm summers.

Anaconda Canada originally explored in the project area for copper during the 1960’s and drilled over 36,000 meters in exploring and defining the copper mineralization. In 1985, Fleck Resources acquired the property and focused on re- assaying Anaconda’s drill core for PGMs and completed another 3,615 meters of drilling. Geomaque Exploration (now Rio Narcea Gold Mines, Ltd.) held an option to purchase this project in 2001. Geomaque spent over $1 million on the project and completed a preliminary assessment of the project in April 2001.

Successive drilling campaigns have progressively added to the Marathon resource on a year over year basis, continually expanding the resource in a systematic approach to exploration. In January 2010, an optimized in-pit resource estimate was released, which is part of the optimized definitive feasibility study for the project. The project consists of the development of an open pit mining and milling operation. The study anticipates that one primary pit and several smaller satellite pits will be mined. During the operating phase of the project, production is expected to be approximately 22,000 tonnes per day. Based upon current reserve estimates and available information the operating life of the mine will be approximately 11.5 years.

Once development proceeds, the project is expected to create an estimated 300 construction jobs, approximately 130 to 250 permanent full-time life of mine positions and roughly three spin-off jobs (suppliers, contractors) in the region for each full-time position.

The ore will be processed (crushed, ground, concentrated) at on-site processing facilities. The final products from the mill will be a concentrate product containing copper, palladium, platinum and gold and a by-product of non-mineralized rock called “process solids”. The concentrate will be transported off-site via road and rail to a smelter and refinery for subsequent metal extraction and separation. The process solids resulting from the milling process will be disposed of in a permitted PSMF. Multiple options for process solids disposal have been assessed, which has resulted in two options for final consideration and environmental assessment. The non-ore bearing mine rock produced will be permanently stored in purposefully built MRSAs located west and east of the main pit.

At closure, or the end of the operational phase of the mine, the project footprint will be reclaimed to permit future use as desired by the local communities and for traditional use by First Nations communities.

The Company has started the federal and provincial environmental permitting and approvals process for the project. In December 2008, the project was accepted into the MPMO initiative. A project description was submitted to the CEAA in March 2010, which triggered the FEA process. On October 7, 2010 the project was referred to an independent review panel. While there can be no certainty as to the project timeline at this point, the Company’s current planning estimates that all federal and provincial approvals would be received in 2013, which based upon approximately a one-year construction schedule would result in an estimated start of commercial production in 2014 or 2015.

Stillwater Mining Company has a history of outstanding environmental performance and is committed to construct and operate the Marathon facilities in a safe and environmentally sound manner, in full compliance with relevant federal

25 and provincial laws and with best environmental practices. The Company prides itself on its ability to work with communities and regulatory agencies, focusing on the design, construction and operation of facilities in a manner that ensures they are managed proactively to protect the environment. The Company strives to be respectful of nature and considerate of all local stakeholders and affected First Nations. The project will bring value to the Company’s shareholders and will improve the social and economic well-being of the nearby communities.

METALLURGICAL COMPLEX

Smelter

The Company owns a smelter facility and associated real estate located in Columbus, Montana. The smelter facility consists of two electric furnaces, two top blown rotary converters (TBRC’s), a matte granulator and gas handling and solution regeneration systems.

During 2009, the Company completed construction of the second smelter furnace at the Columbus facility. The new furnace is intended to accommodate forecasted levels of future processing, mitigate any potential operational risk (virtually all of the Company’s metal production is dependent on the availability of the smelter facility), and allow the Company to continue processing during periodic scheduled maintenance shutdowns. After stripping out the old refractory material from the original furnace during 2010, the furnace will be rebricked during 2011 and reconfigured as a “slag cleaning” furnace. In this configuration, slag tapped from the second furnace would be laundered into the original furnace, providing additional residence time for the matte to separate from the slag material with the intent of increasing metal recoveries. Reconfigured as such, the slag cleaning furnace also serves as a backup production furnace if needed.

Concentrates from the mine sites are transported to the smelter, dried, and fed into the electric furnace. In the furnace, the concentrates are commingled with spent catalyst materials collected by the Company’s recycling business segment. The combined feed is melted in the furnace, where the lighter silica-rich slag separates out into a distinct layer that floats on the heavier nickel-copper PGM-rich matte. The matte is tapped from the furnace periodically and granulated. This granulated furnace matte is then re-melted and processed in a TBRC, which extracts iron from the converter matte. The converter matte is poured from the TBRC, granulated and transferred to the base metals refinery for further processing. The granulated converter matte, approximately 6% of the original smelter feed by weight, consists principally of copper and nickel sulfides containing about 1.5% to 2.0% PGMs. The slag is separately tapped from the furnace, cooled and returned to the mine for reprocessing.

The gases released from the smelting operations are routed through a gas/liquid scrubbing system, which removes approximately 99.8% of the contained sulfur dioxide. Spent scrubbing solution is treated in a process that converts the sulfur dioxide into gypsum, or calcium sulfate, and regenerates clean scrubbing solution. The gypsum is sold for use as a soil amendment by farmers and as a water treatment additive in the coal bed methane industry.

Base Metal Refinery

The Company’s base metal refinery is located on property the Company owns adjacent to the smelter in Columbus, Montana.

The base metal refinery utilizes the patented Sherritt Process, whereby a sulfuric acid solution dissolves the nickel, copper, cobalt and residual iron in the converter matte. These metals are separated chemically from the PGM-bearing converter matte and the copper and nickel ultimately are marketed as by-products. Iron is precipitated from an iron- copper-nickel-cobalt solution and is returned to the smelter to be processed and removed in the slag. A nickel crystallizer circuit produces a crystalline nickel sulfate by-product containing minor amounts of cobalt, which is marketed under sales contracts with various companies. A copper electrowinning circuit removes copper from solution as cathode copper that is marketed to copper refiners for upgrading to commercial grade material. The removal of these metals upgrades the PGM fraction of the converter matte product substantially from about 1.5% PGMs to approximately 37% PGMs.

The base metal refinery produces a palladium, platinum and rhodium-rich filter cake, which also contains minor amounts of gold and silver. This filter cake is shipped to third-party precious metal refineries in New Jersey and California under tolling agreements that provide the Company with returns of finished metal. The palladium and platinum metals are returned to the Company’s account as 99.95% purity sponge; rhodium, gold and silver are also returned to the Company’s account. The refined metal is then available for delivery to the Company’s customers. The Company pays its refiners a per-ounce refining charge for the toll processing of the refined filter cake, and they also retain a small percentage of the contained metals.

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PGM RECYCLING

The Company regularly sources spent catalytic converter materials containing PGM metals from third-party suppliers and processes them through its metallurgical complex. Such materials may either be purchased outright or may be processed and returned to the supplier for a tolling fee. The spent catalytic material is collected by the third party suppliers, primarily from automobile repair shops and automobile yards that disassemble old cars for the recycling of their parts. The Company also processes spent PGM catalysts from petroleum refineries and other sources, normally on a tolling basis.

Upon receipt of the PGM materials for recycling, they are weighed, crushed and sampled prior to being commingled with mine concentrates for smelting in the electric furnace. Nickel and copper sulfides which occur naturally in the mine concentrates act as a metallurgical collector to facilitate the chemical extraction of the PGMs from the recycled material.

In acquiring recycled automotive catalysts, the Company sometimes advances funds to its suppliers in order to facilitate procurement efforts. During 2009, the Company modified its recycling business model to narrow the amount of advances outstanding to such suppliers while at the same time continuing to support and grow the recycling segment. Total outstanding procurement advances to recycling suppliers totaled $6.1 million and $3.6 million at December 31, 2010 and 2009, respectively. In the current business environment, the Company has generally limited working capital advances to new suppliers for material that has been procured and awaiting transit or physically in transit to the Company’s processing facilities.

Recycled ounces sold in 2010 increased to 156,100 ounces compared to 102,000 ounces in 2009. In addition to purchased material, the Company processed 235,900 ounces of PGMs on a tolling basis in 2010, up from 128,000 tolled ounces in 2009. In total, recycled volumes fed to the smelter increased to 399,400 ounces of PGMs in 2010, up 59.1% from 251,000 ounces in 2009. The stronger volumes in 2010 were mostly the result of more material available in the market in response to higher PGM market prices.

The Company records revenue and costs of metals sold for the processing of these recycled materials. Revenues from recycling increased substantially to $168.6 million in 2010, from $81.8 million in 2009, but were $475.4 million in 2008. Costs of metals sold were $157.3 million, $75.9 million and $448.4 million for 2010, 2009 and 2008, respectively – most of these costs are associated with purchasing the recycled material for processing. Earnings from the processing of recycled catalysts in 2010, 2009 and 2008, including financing charges to customers, were $11.5 million, $6.5 million and $7.8 million, respectively. Following the steep drop in PGM prices and doubts as to collectability under various commitments with suppliers, the 2010, 2009 and 2008 recycling results included write-downs of $0.6 million, $0.5 million and $26.0 million, respectively, of advances to suppliers in its recycling business.

Because of the significant quantities of recycling material typically processed through its smelter and base metal refinery and the substantial time required for processing, the Company usually carries large inventories of recycling material in process. Working capital associated with these recycling activities as inventories and advances was $41.5 million and $29.0 million at December 31, 2010 and 2009, respectively.

OTHER PROPERTIES

The Company owns a warehouse facility in Columbus, Montana and leases office space in Columbus and Billings, Montana. The Company’s corporate office is located in the office space leased in Billings, Montana. The annual expense for office leases totals $0.3 million per year. The Company also owns parcels of rural land in Stillwater and Sweet Grass Counties, Montana, near its mine and metallurgical complex sites totaling approximately 4,549 acres and additional properties in the communities of Columbus and Big Timber, Montana, Marathon, Ontario and Lac du Bonnet, Manitoba which are used as support facilities.

LONG-TERM FINANCING

Convertible Debentures

On March 12, 2008, the Company issued and sold $181.5 million aggregate principal amount of senior convertible debentures due in 2028 (debentures). The debentures pay interest at 1.875% per annum, payable semi-annually on March

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15 and September 15 of each year. The debentures will mature on March 15, 2028, subject to earlier repurchase or conversion. Each $1,000 principal amount of debentures is initially convertible, at the option of the holders, into approximately 42.5351 shares of the Company’s common stock, at any time prior to the maturity date. The conversion rate is subject to certain adjustments, but will not be adjusted for accrued interest or any unpaid interest. The conversion rate initially represents a conversion price of $23.51 per share. Holders of the debentures may require the Company to repurchase all or a portion of their debentures on March 15, 2013, March 15, 2018 and March 15, 2023, or upon the occurrence of certain events including a change in control. The Company may redeem the debentures for cash beginning on or after March 22, 2013.

The debentures were sold to an “accredited investor” within the meaning of Rule 501 under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon the private placement exemption afforded by Section 4(2) of the Securities Act. The initial investor offered and resold the debentures to “qualified institutional buyers” under Rule 144A of the Securities Act. An affiliate of MMC Norilsk Nickel, with the approval of the Company’s public directors, purchased and as of December 31, 2010, currently holds $80 million of the debentures.

In connection with the issuance of the debentures, the Company incurred $5.1 million of issuance costs, which primarily consisted of investment banking fees, legal and other professional fees. These costs are classified within other noncurrent assets and are being amortized as interest expense over the term from issuance through the first date that the holders can require repurchase of the debentures, which is March 15, 2013. Amortization expense related to the issuance costs of the debentures was $0.9 million, $1.0 million and $0.8 million in 2010, 2009 and 2008, respectively, and the interest expense on the debentures was $3.1 million, $3.3 million and $2.7 million in 2010, 2009 and 2008, respectively. The Company made cash payments of $3.1 million, $3.4 million and $1.7 million for interest on the debentures during 2010, 2009 and 2008, respectively.

In October 2009, the Company undertook the exchange of $15 million face amount of the convertible debentures for 1.84 million shares of the Company’s common stock. The debentures so acquired have been retired, leaving $166.5 million face value of the debentures outstanding at December 31, 2009. Because the number of shares issued in this transaction exceeded the 42.5351 shares per $1,000 of face value specified in the bond indenture, accounting principles required that the Company expense the value of the excess shares as an “inducement loss.” Consequently, the Company recorded a loss on the exchange transaction of $8.1 million during the fourth quarter of 2009.

During the fourth quarter of 2009, the Company filed a $450 million shelf registration statement. The registration statement became effective on December 8, 2009, and permits the Company to issue any of various public debt or equity instruments for financing purposes so long as the registration statement remains effective. The Company is generating significant cash flow at the current time and will also consider its financing needs as its plans develop and opportunities warrant. In this connection, the development of the Marathon property will require significant capital and the debentures may require cash payments, whether upon maturity or earlier redemption. Management believes that the shelf may facilitate access to additional liquidity in the future. However, there is no assurance that debt or equity capital would be available to the Company in the public markets should the Company determine to issue securities under the shelf registration.

PGM SALES AND HEDGING

Mine Production

Palladium, platinum, rhodium, gold and silver are sold to a number of consumers and dealers with whom the Company has established trading relationships. Refined platinum group metals (PGMs) of 99.95% purity (rhodium of 99.9%) in sponge-form are transferred upon sale from the Company’s account at third-party refineries to the account of the purchaser. After final refining, by-product gold, silver and rhodium are normally sold at market prices to customers, brokers or outside refiners. Copper and nickel by-products from the Company’s base metal refinery, however, are produced at less than commercial grade, so prices for these metals typically reflect a quality discount. By-product sales are included in revenues from mine production. During 2010, 2009 and 2008, total by-product (copper, nickel, gold, silver and mined rhodium) sales were $28.0 million, $23.6 million and $36.8 million, respectively.

The Company’s ten-year sales agreement with Ford Motor Company expired at the end of 2010. Under this sales agreement, Ford purchased 80% of the Company’s mined palladium production and 70% of its mined platinum production each month. The Ford contract included certain guaranteed pricing floors and caps for metal delivered, partly protecting the parties from extreme fluctuations in PGM prices. Metal sales under the agreement, when not affected by

28 the guaranteed floor or ceiling prices, were priced at a slight discount to market. Going forward, the absence of the price protection in the Ford agreement will increase the Company’s financial exposure to low PGM prices. Nevertheless, the Company has recently signed a new three-year palladium supply agreement with General Motors Corporation, a one-year palladium agreement with BASF Corporation (BASF), and is engaged in discussions with other potential customers for the remainder of its mined palladium and platinum.

The Company has historically entered into derivative contracts and hedging arrangements from time to time to manage the effect on the Company’s cash flow of fluctuation in the price of palladium and platinum from mine production. Hedging activities consist of fixed forwards for future delivery of specific quantities of PGMs at specific prices, and financially settled forwards that provide for net cash settlement of forward sales. Gains or losses can occur as a result of hedging strategies if the derivative contracts ultimately settle at prices above or below market. See Note 6 “Derivative Instruments” to the Company’s 2010 audited consolidated financial statements for further information.

PGM Recycling

The Company has capacity available in its smelter and base metal refinery and purchases catalyst materials from third parties for recycling in those facilities to recover PGMs. The Company has entered into sourcing arrangements for catalyst material with several suppliers. Under these sourcing arrangements, the Company advances cash to suppliers for purchase and collection of these spent catalyst materials. These advances are reflected as advances on inventory purchases and included in Other current assets on the Company’s consolidated balance sheet until such time as the material has been physically received and title has transferred to the Company. Following the steep drop in PGM prices and doubts as to collectability under various commitments with suppliers, the 2010, 2009 and 2008 recycling results included write-downs of $0.6 million, $0.5 million and $26.0 million, respectively, of advances to suppliers in its recycling business. Since 2008, the Company has restructured its recycling business model somewhat to further restrict the conditions under which funds are advanced and thereby limit its financial exposure to its suppliers. See “Business, Risk Factors and Properties – Risk Factors – Reliance on a Few Third Parties for Sourcing of Recycling Materials and Advances for Recycling Materials Creates the Potential for Losses.” The Company regularly enters into fixed forward sales related to recycling of catalysts. These fixed forward sales transactions in the recycling business have not been accounted for as derivatives because they qualify as “normal purchases/normal sales” under generally accepted accounting principles. Metals from processing recycled materials are generally sold forward at the time the material is purchased and then are delivered against the forward sales contracts when the ounces are recovered.

At various times during the latter period of the agreement with General Motors, the Company elected to fulfill a portion of its palladium delivery commitments utilizing recycled metal. Consequently, a portion of the Company’s palladium from recycling from time to time was priced using financially settled forward sales, which allowed the Company to price the metal forward. Because these financially settled forward sales inherently settled net, they were not eligible for the normal sales exemption. The Company elected not to designate these financially settled forward sales as hedges. Changes in fair value of these financially settled forwards at the end of each accounting period were reflected in recycling revenue. The corresponding net realized loss on these derivatives in 2009 and 2008 was $0.2 million in each year. There were no financially settled forward contracts outstanding at December 31, 2010.

All of the Company’s recycling forward sales transactions open at December 31, 2010, will settle at various periods through June 2011. See Note 6 “Derivative Instruments” to the Company’s 2010 audited consolidated financial statements for more information. The Company has credit agreements with its major trading partners that provide for it to make margin deposits in the event that forward prices for metals exceed the Company’s hedged prices by a predetermined margin limit. No margin deposits were required or outstanding as of December 31, 2010 or 2009.

Other

The Company makes other open market purchases of PGMs from time to time for resale to third parties. The Company recognized revenue of $6.2 million, $5.8 million and $20.0 million on ounces purchased in the open market and re-sold for the years ended December 31, 2010, 2009 and 2008, respectively. These purchases for resale were essentially breakeven transactions undertaken for the convenience of certain customers.

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TITLE AND ROYALTIES

Montana, USA

The Company holds 1,006 patented and unpatented lode or mill site claims in Montana covering approximately 16,200 acres along the apex of the J-M Reef mineral zone and on adjacent federal lands utilized for the Company’s operations facilities. The Company believes that approximately 130 of these claims cover 100% of the known apex of the J-M Reef. The Company’s remaining unpatented claims either adjoin the apex of the J-M Reef or secure sites for surface operations. Prior to the federal moratorium on processing new applications for mining claim patents, the Company had leasehold control on one patented claim under the Mouat Agreement, had been granted patents on 34 of its own claims (a combined total of 735 acres), and had 33 patent applications pending on 135 additional mining claims covering an area of 2,249 acres. The applications included claims owned directly by the Company or held by the Company in leasehold. During the fourth quarter of 2001, 31 new patents were issued to the Company for 126 mining claims covering 2,126 acres. At year-end 2001, patents had been issued for all submitted applications involving the claims owned directly by the Company. In a decision dated April 30, 2002, the Montana State Office of the Bureau of Land Management (BLM) rejected two mineral patent applications submitted prior to July 13, 1993 covering 123 acres in nine mining claims held by the Company in leasehold under the Mouat Agreement. The Company joined with the Mouat interests in appealing the BLM decision to the U.S. Department of the Interior Board of Land Appeals (IBLA). On April 25, 2005, Administrative Judges for the IBLA ruled in favor of the Mouat Interests’ and Company’s appeal and remanded the cases to the BLM with instruction to issue the pending patents. As of the date of this filing, the Certificates of Patent had not yet been issued; however, the Company considers the matter resolved and expects the patents to be granted in due course. The Company presently maintains 836 active unpatented mining and mill site claims. Unpatented mining claims may be located on lands open to mineral appropriation and are generally considered to be subject to greater title risk than other real property interests because the validity of unpatented mining claims is often uncertain and such claims are more commonly subject to challenges of third parties, regulatory or statutory changes, or contests by the federal government. The validity of an unpatented mining claim or mill site claim, in terms of establishing and maintaining possessory rights, depends on strict compliance with a complex body of federal and state statutory and decision law regarding the location, qualifying discovery of valuable minerals, occupancy and beneficial use by the claimant.

Of the Company’s 1,006 controlled claims, 868 are subject to royalties, including 840 subject to a 5% net smelter royalty payable to Franco Nevada U.S. Corporation (formerly Newmont Capital Limited), 143 subject to a 0.35% net smelter royalty payable to the Mouat family, and 115 subject to both royalties. During 2010, 2009 and 2008, the Company incurred royalty expenses of $13.7 million, $10.6 million and $14.6 million, respectively. At December 31, 2010, 100% of the Company’s proven and probable ore reserves were secured by either its control of 161 patented mining claims or the nine current first-half certified claims pending final action under the April 2005 appeal ruling by the IBLA. Processing facilities at the East Boulder Mine are situated on 127 validated unpatented mill site claims.

Ontario, Canada

In the fourth quarter of 2010, the Company acquired Marathon PGM Corporation and its PGM-copper assets and, pursuant to a definitive agreement in December 2010, announced its intent to acquire certain exploration properties and royalty interests of Benton Resources Corp. situated in northwest Ontario, Canada in 2011. Upon completion of the transaction with Benton Resource Corp., the Company will own mining claims and crown leases totaling approximately 15,239 hectares (37,878 acres) covering the more prospective portions of the Port Coldwell Intrusive Complex. The Coldwell Complex hosts the Marathon PGM-Copper deposit and is located near the northern shore of Lake Superior adjacent to the town of Marathon, Ontario.

After completion of the Benton Resources Corp transaction in 2011, the Company’s aggregate property holdings in the Coldwell Complex will include 42 crown leases on 2,849 hectares (7,040 acres) and 77 mining claims comprised of 780 claim units totaling 12,480 hectares (30,838 acres). Thirty-seven of the leases (1,365 hectares) grant both surface and mineral rights while five of the leases (1,484 hectares) presently grant mineral rights only. Applications have been submitted for surface leases on the 5 mineral leases as well as for both mineral and surface crown leases on certain additional property currently held by the Company under valid mining claims. In Canada, paramount title to minerals typically vests in the Crown subject only to the burden of aboriginal title, while the various Ministries of the Provinces enjoy legislative powers to administer the disposition of minerals within their jurisdiction. In Ontario, mining claims grant the claimant conditional rights of access for exploration of hard rock minerals conducted in compliance with regulations regarding surface disturbance, environmental stewardship and annual expenditures to maintain the validity of the claims. Mining claims in Ontario do not authorize removal of minerals for other than test work and analyses. To

30 commercially extract minerals, a mining lease is necessary. Crown mining leases provide the claimant with a preference right to develop and extract minerals for a (renewable) 21-year term, under more specific conditions of aboriginal consultation, environmental protection, approved closure/reclamation plans and financial assurances provided to the Crown over the life of the project. The Company believes that its mining claims and crown leases provide adequate security of mineral and surface tenure to advance its planned mine development and mineral exploration activities in the Marathon-Coldwell region of Ontario.

The Company’s Ontario properties in the Coldwell Complex remain subject to certain underlying provisions and production royalty interests. Production royalty interests include: a 2% NSR royalty payable to Teck Cominco Ltd. in respect to the ‘Bamoos leases’ (217 hectares), a 1% NSR royalty payable to Stephen Stares in respect to the ‘Bermuda claim’ (94 hectares); a 2% NSR royalty payable to Franco Nevada (as successors in interest to Newmont and Redstone Resources) in respect to the Par Lake, et.al. leases (1,315 hectares); a conditional 2% NSR royalty payable to Benton Resources Corp. in respect to the ‘Bermuda Properties’ (7,317 hectares); a 1% NSR royalty payable to Stephen Stares in respect to certain of the ‘Bermuda Properties (approximately 7,300 hectares); a conditional 2% NSR royalty payable to Rudy Wahl in respect to the ‘Coubran Lake’ claims (752 hectares); and a conditional 2.5% NSR royalty payable to Superior Prospects Inc. in respect to the ‘Geordie Lake claims’ (1,520 hectares). At the date of filing, approximately 4% of the Company’s stated proven and probable ore reserves at the Marathon PGM-copper deposit are subject to the 2% NSR royalty payable to Teck Cominco Ltd. The Company’s other royalty obligations affect only exploration-stage properties in the Marathon/Coldwell region.

At the Company’s Geordie Lake exploration property located approximately 8 km west of the Marathon PGM- Copper deposit, Gryphon Metals, Inc. retains a back-in option to a 12.5% working interest on the ‘Geordie Lake claims’ (1,520 hectares). The option can be exercised upon completion and delivery of a feasibility study by the Company and Gryphon making a cash payment to the Company equal to 31.25% of all costs incurred on the property through completion of the feasibility study.

REGULATORY AND ENVIRONMENTAL MATTERS

Montana, USA

General

The Company’s business is subject to extensive federal, state and local government controls and regulations, including regulation of mining and exploration which could involve the discharge of materials and contaminants into the environment, disturbance of land, reclamation of disturbed lands, associated potential impacts to threatened or endangered species and other environmental concerns. In particular, statutes including, but not limited to, the Clean Air Act, the Clean Water Act, the Solid Waste Disposal Act, the Emergency Planning and Community Right-to-Know Act, the Endangered Species Act and the National Environmental Policy Act, impose permit requirements, effluent standards, air emission standards, waste handling and disposal restrictions and other design and operational requirements, as well as record keeping and reporting requirements, upon various aspects of mineral exploration, extraction and processing. In addition, the Company’s existing mining operations may become subject to additional environmental control and mitigation requirements if applicable federal, state and local laws and regulations governing environmental protection, land use and species protection are amended or become more stringent in the future. The Company is aware that federal regulation under the Solid Waste Disposal Act governing the manner in which secondary materials and by-products of mineral extraction and beneficiation are handled, stored and reclaimed or reused are subject to frequency review by the agencies which could affect the Company’s facility design, operations, and permitting requirements. See “Business, Risk Factors and Properties – Risk Factors – Changes to Regulations and Compliance with Regulations Could Affect Production, Increase Costs and Cause Delays.”

The Stillwater Mine and the East Boulder Mine are located on the northern edge of the Absaroka-Beartooth Wilderness Area, about 30 miles north of Yellowstone National Park. Due to the proximity of the Company’s operations to Yellowstone National Park and a wilderness area, the Company’s operations are subject to stringent environmental controls that may adversely impact the Company’s operations. For example, increasingly stringent requirements may be adopted under the Clean Water Act, Clean Air Act or Endangered Species Act which could require installation of environmental controls not required of competitors located overseas. See “Business, Risk Factors and Properties – Risk Factors – Changes to Regulations and Compliance with Regulations Could Affect Production, Increase Costs and Cause Delays.”

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The Company’s past and future activities may also cause it to be subject to liabilities under provisions of the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (CERCLA), and analogous state law. Such laws impose strict liability on certain categories of potentially responsible parties including current property owners for releases or threatened releases of hazardous or deleterious substances into the environment that result in cleanup and other remediation costs.

Generally compliance with the above statutes requires the Company to obtain permits issued by federal, state and local regulatory agencies and to file various and numerous reports that track operational monitoring, compliance, performance and records keeping activities of its operational effect on the environment. Certain permits require periodic renewal or review of their conditions. The Company cannot predict whether it will be able to renew such permits or whether material changes in permit conditions will be imposed. Non-renewal of permits or the imposition of additional conditions could have a material adverse effect on the Company’s financial condition and results of operations. See “Business, Risk Factors and Properties - Risk Factors - If the Company is Unable to Obtain Surety Coverage to Collateralize Its Reclamation Liabilities, Operating Permits May Be Affected.”

For the past several years, the Company has employed various measures in an effort to protect the health of the Company’s workforce and to comply with much stricter MSHA limits on DPM exposure for the underground miners. These measures have included using catalytic converters, filters, enhanced ventilation regimens, modifying certain mining practices underground, and the utilization of various bio-diesel blends. The new DPM limits were delayed for a time, but ultimately went into effect on May 20, 2008. Compliance with the revised MSHA DPM standards continues to be a challenge within the mining industry. However, as a result of its internal efforts to reduce DPM exposure, recent sampling indicates that the Company has achieved compliance with the new standards at both the Stillwater Mine and the East Boulder Mine. No assurance can be given that any lack of compliance in the future will not impact the Company.

Nitrogen concentrates in groundwater have been elevated above background levels at both the Stillwater Mine and the East Boulder Mine as a result of operational activities and discharges currently authorized under permit. Noncompliance with standards have occurred in some instances and are being addressed by the Company through action plans approved by the appropriate federal and state regulatory agencies. In view of its good-faith efforts to comply and progress to date in implementing remedial and advanced treatment technologies, the Company does not believe that failure to be in strict compliance will have a material adverse effect on the Company. The Company further anticipates that the implementation of remedial measures will be effective in mitigating impacts to a level that meets permit and statutory water quality standards.

The Company believes that its operations and facilities comply in all material respects with current federal, state and local permits and regulations, and that it holds all necessary permits for its operations at the Stillwater and East Boulder Mines and to complete all of its planned expansion projects. However, compliance with existing and future laws and regulations may require additional control measures and expenditures, which cannot be estimated at this time. Compliance requirements for new mines and mills may require substantial additional control measures that could materially affect permitting and proposed construction schedules for such facilities. Under certain circumstances, facility construction may be delayed pending regulatory approval. The cost of complying with future laws and regulations may render currently operating or future properties less profitable and could adversely affect the level of the Company’s ore reserves and, in the worst case, render its mining operations uneconomic.

Permitting and Reclamation

Operating Permits 00118 and 00149 issued by the Montana Department of State Lands encompass approximately 2,475 acres at the Stillwater Mine located in Stillwater County, Montana and 980 acres at the East Boulder Mine located in Sweet Grass County, Montana. The permits delineate lands that may be subject to surface disturbance. At present, approximately 453 acres have been disturbed at the Stillwater Mine, and 200 acres have been disturbed at the East Boulder Mine. The Company employs concurrent reclamation wherever feasible.

Reclamation regulations affecting the Company’s operations are promulgated and enforced by the Hard Rock Bureau of the Montana Department of Environmental Quality (DEQ). The United States Forest Service (USFS) may impose additional reclamation requirements during the permitting process. For regulatory purposes, reclamation does not mean restoring the land to its pre-mining state. Rather, it means returning the post-mining land to a state which has stability and utility comparable to pre-mining conditions. Major reclamation requirements include stabilization and re-vegetation of disturbed lands, controlling storm water and drainage from portals and waste rock dumps, removal of roads and structures, treating and the elimination of process solutions, treatment and the elimination of mine water prior to discharge in compliance with standards and visual mitigation.

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Permits governing air and water quality are issued to the Company by the Montana DEQ, which has been delegated such authority by the federal government. Operating permits issued to the Company by the Montana DEQ and the USFS do not have an expiration date but are subject to periodic reviews. The reviews evaluate bonding levels, monitor reclamation progress, and assess compliance with all applicable permit requirements and mitigation measures. Closure and reclamation obligations are reviewed and reassessed by the agencies and the Company on a five year rotating schedule. Bonding and financial guarantees are posted with the agencies to cover final reclamation costs at the end of the reconciliation and reassessment process. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

In mid-2000, the Company signed an agreement with local environmental groups known as the “Good Neighbor Agreement” (GNA). By way of the agreement, the group and its affiliates the “Councils” agreed not to challenge permit renewals or submittals in exchange for the Company participation in programs that reduce traffic flows to both the Stillwater Mine and the East Boulder Mine. Additionally, the Company is funding expanded monitoring programs and has funded the development of a watershed partnership for the Boulder River basin to assist residents in improving the quality of surface and ground water. In August of 2005, this agreement was mutually amended to acknowledge the progress made in implementing the agreement and completing and finalizing many of the agreement requirements. Additionally, future commitments were reviewed and amended as appropriate in an effort to bring the agreement current with existing environmental conditions, updated technical data and changes to schedules and monitoring plans resulting from information gathered during the previous 5-year period. In 2010, the Agreement celebrated ten years of successful implementation which has made it the recognized model within the natural resources industry for successful collaboration and dispute resolution. The Company estimates the total cost of all the environmental programs associated with the implementation of the agreement to be between $0.2 million and $0.3 million annually.

The Company’s environmental expenses for Montana operations were $3.3 million, $2.7 million, and $3.6 million in 2010, 2009 and 2008, respectively. The Company had capital expenditures for environmental facilities during 2010, 2009 and 2008 of $0.2 million, $1.2 million and $1.0 million, respectively. The Company’s ongoing operating expenditures for environmental compliance are expected to total at least $4.1 million per year and will be expensed as incurred.

Ontario, Canada

On November 30, 2010 Stillwater Mining Company completed the acquisition of the Canadian company Marathon PGM Corporation. The acquisition consisted of the PGM assets of Marathon PGM Corporation, including the Marathon PGM-Copper project. The transaction was valued at US$173.4 million (including $36.0 million of deferred income tax liability assumed).

The project is the most advanced property in the acquisition. The total mineral reserve is estimated to be about 91 million tonnes with 0.247% copper and 1.07 g/t Pd+Pt and an estimated mine life of 11.5 years. The Company is continuing with baseline environmental and socio-economic studies and is engaged with federal, provincial regulatory ministries and First Nation communities to secure the required permits and approvals for mine construction and operation. In December 2008, the project was accepted under the Major Projects Management Office (MPMO) initiative. A formal project description was submitted to the Canadian Environmental Assessment Agency (CEAA) in March 2010, which triggered the Federal Environmental Assessment (FEA) process. Authorizations are required for the project from the following federal agencies; the Department of Fisheries and Oceans, Transport Canada and Natural Resources Canada. These federal agencies sent letters of recommendation to the Minister of Environment and subsequently on October 7, 2010, the project was referred to an independent review panel. The Company cannot predict when or whether operating permits will be obtained or whether material changes in permit requirements, conditions or the regulatory process will be imposed. Any delay in the permit approval process could have a material adverse effect on the Company’s financial condition and results of operations. See “Business, Risk Factors and Properties — Risk Factors – If the Company is Unable to Obtain Surety Coverage to Collateralize Its Reclamation Liabilities, Operating Permits May Be Affected.”

COMPETITION: PALLADIUM AND PLATINUM MARKET

General

Palladium and platinum are rare precious metals with unique physical qualities that are used in diverse industrial applications and in the jewelry industry. The development of a less expensive alternative alloy or synthetic material with

33 the same characteristics as PGMs for industrial purposes could reduce demand for the Company’s products and drive down PGM prices. Although the Company is unaware of any such alloy or material, there can be no assurance that none will be developed. Jewelry demand is influenced by a variety of external factors, including fashion trends, metal prices and the general state of the economy. Adverse changes in any of these factors could negatively affect the Company’s financial performance.

Significant quantities of platinum and palladium are held in inventory by investors, trading houses and government entities. The number of ounces in each of these inventories is not always disclosed publicly, nor is it clear under what circumstances these holdings might be brought to market. For example, in the past, the Russian Federation has held large inventories of palladium as strategic inventory, selling substantial volumes from time to time without warning into the market. There is no official disclosure of the size of the Russian inventories or clarity as to plans for future sales and some have suggested that the Russian government inventories now are nearly depleted. Also, new exchange-traded funds, or ETFs, have been introduced recently that may enable more investors to participate in the PGM markets, potentially resulting in more metal being held in inventory. The overhang from these significant investment holdings of platinum and palladium makes it more difficult to predict accurately future supply and demand for these metals and may contribute to added PGM price volatility.

The Company competes with other suppliers of PGMs, some of which are significantly larger than the Company and have access to greater mineral reserves and financial and commercial resources. Some significant suppliers produce platinum in greater quantities than palladium and thus currently enjoy average per ounce revenue greater than the Company. Some significant suppliers of PGMs produce palladium and platinum as by-products of other production and consequently, on a relative basis, are not as directly impacted by changes in the price of palladium as the Company is. See “Global Supply” below. New mines may be developed over the next several years, potentially increasing supply. Furthermore, the volume of PGMs recovered through recycling scrap sources, mostly spent automotive and industrial catalysts, is increasing. There can be no assurance that the Company will be successful in competing with these existing and emerging PGM producers. See “Business, Risk Factors and Properties – Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Global Demand

The unique physical qualities of PGMs include: (1) a high melting point; (2) excellent conductivity and ductility; (3) a high level of resistance to corrosion; (4) strength and durability; and (5) strong catalytic properties.

Johnson Matthey estimates that demand for palladium (net of recycling volumes) likely increased by approximately 12% to 7.1 million ounces during 2010. Their Platinum 2010 Interim Review Report published in November 2010 (Johnson Matthey or the Johnson Matthey report), projected that 2010 palladium demand increased from 2009 primarily as a result of recovering demand in the automotive catalyst and electronics markets. They also estimate that palladium recycling volumes increased in 2010 by 29% over 2009.

The largest application for palladium is in automotive catalytic converters. In 2010, this industry consumed approximately 3.8 million ounces (net of recycling), or about 54% of net worldwide palladium demand. (Johnson Matthey estimates that an additional 1.3 million palladium ounces generated from recycling also were consumed in catalytic converters during 2010, up from about 965,000 ounces in 2009.) Overall, net consumption of palladium in catalytic converters has increased by about 24% from 2009. Industrial demand for palladium includes applications in electronics and the chemical industry; Johnson Matthey indicates net year-on-year demand for industrial palladium increased by 12.5% to about 1.35 million ounces. Johnson Matthey estimates that approximately 1.0 million ounces (net of recycling), or about 13.6% of 2010 palladium demand, was consumed in the production of electronic components for personal computers, cellular telephones, facsimile machines and other devices. Net palladium jewelry demand worldwide for 2010 is estimated by Johnson Matthey to have decreased by about 22.7% from the previous year to about 545,000 ounces, mostly in response to sharply rising palladium prices. Johnson Matthey also reported that dentistry continues to be a major user of palladium for gold-based dental alloys, and that dental demand remained about flat at approximately 620,000 ounces, or 8.7% of total palladium demand for 2010. According to Johnson Matthey, investment demand probably grew modestly in 2010 to an estimated 670,000 ounces, about 9.4% of total 2010 palladium demand; that compares to investment demand of about 625,000 ounces in 2009, representing about 9.9% of total 2009 palladium demand. Investment demand was stimulated in part by the January 2010 introduction of palladium and platinum ETFs as retail investment vehicles in the U.S.

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According to Johnson Matthey, the outlook for palladium over the next year is largely positive, driven primarily by recovery in the automotive sector, growth in Chinese industrial demand for the metal and increasing use of palladium in the after treatment systems of diesel catalytic converters. Over the past several years, the pricing disparity between platinum and palladium has driven research into substituting palladium for platinum in diesel catalytic converters, whereby the technical limit on palladium content reportedly has now risen to as much as 50% of the total PGMs in diesel catalytic converters. Jewelry consumption of palladium reportedly has been declining in China, partially due to higher prices, but interest in palladium continues to grow in other markets, particularly with the introduction of a compulsory palladium hallmark January 1, 2010 in the United Kingdom. The effect of the introduction in early 2010 of new exchange-traded funds in New York for platinum and palladium drew strong investor interest early on but has slowed since then. Johnson Matthey comments that, in their view, the two critical factors in the palladium market for 2011 are the availability of export sales from the Russian government stockpiles and the relative strength of Chinese industrial and economic growth.

Johnson Matthey estimates that for 2010 palladium was in surplus by about 45,000 ounces – essentially in balance. Prices for palladium in 2010, based on London Bullion Market Association afternoon postings, ranged from a low of $395 per ounce on February 5, 2010 to end 2010 at a high of $797 per ounce.

Charts reproduced from the Johnson Matthey Platinum 2010 Interim Review. Permission to reproduce was neither sought nor obtained.

Johnson Matthey reports that 2010 demand for platinum (net of recycling volumes) probably increased by 6.1% to about 5.7 million ounces in 2010 from 5.4 million ounces in 2009. (Johnson Matthey estimates that platinum supplied from recycling totaled 1.84 million ounces in 2010, up from about 1.4 million ounces in 2009.) Platinum purchases by the auto catalyst sector (net of recycling volumes) grew during 2010 by 39.5% to 1.9 million ounces, driven principally by recovery during 2010 in the market for diesel-powered automobiles in Europe. Johnson Matthey anticipates that diesel demand will strengthen further in the future as the European economy improves.

Jewelry demand for platinum (net of recycling) declined in 2010 by 24.9% to about 1.7 million ounces. This decline reflects the effect of higher metal prices in 2010.

Industrial uses of platinum include the production of data storage disks, fiberglass, paints, nitric acid, anti-cancer drugs, fiber optic cables, fertilizers, unleaded and high-octane gasoline and fuel cells. Johnson Matthey projects that gross industrial consumption of platinum during 2010 increased by about 51%, reflecting the impact of the economic recovery on industrial activity in 2010.

In Johnson Matthey’s view, the outlook for platinum demand for the next year or so is dependent on the strength of the economic recovery, which as it progresses should gradually restore diesel demand in Europe and continue to support industrial demand for the metal. Jewelry demand is sensitive to metal prices and will be slow to recover while prices remain strong and consumer demand is lukewarm. Overall, they conclude, platinum is likely to remain in modest surplus over the next year.

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Johnson Matthey estimates that platinum supplied to the market in 2010 exceeded demand by about 290,000 ounces. The price of platinum during 2010, based on London Bullion Market Association afternoon postings, ranged from a high of $1,786 per ounce, reached on November 9, 2010, compared to a low of $1,475 per ounce on February 5, 2010, and closed the year trading at $1,755 per ounce. See “Business, Risk Factors and Properties – Risk Factors – Users of PGMs May Reduce Their Consumption and Substitute Other Materials for Palladium and Platinum.”

Global Supply

On the supply side, Johnson Matthey noted that their tally of 2010 PGM supply includes about one million ounces of palladium transferred out of Russian state inventories during the year and then subsequently sold. Johnson Matthey acknowledges that, going forward, these Russian inventory sales constitute a significant uncertainty in projecting annual palladium supply. Including these state transfers, Johnson Matthey reports that palladium supplied to market in 2010 of 7.14 million ounces was just 0.6% higher than 2009 levels.

The leading global sources of palladium and platinum production are mines located in the Republic of South Africa and the Russian Federation. The Johnson Matthey report estimates that South Africa provided approximately 34.8% of the palladium and 76.3% of the platinum sold worldwide during 2010. The same report also estimates that the Russian Federation, both as a by-product of nickel production from Norilsk Nickel and from transfers out of government inventories, provided approximately 52.0% of the palladium and approximately 13.5% of the platinum sold worldwide in 2010 (see charts below). (In preparing these estimates, Johnson Matthey treats PGM recycling volumes as a net offset against demand, rather than as new supply.)

Charts reproduced from the Johnson Matthey Platinum 2010 Interim Review. Permission to reproduce was neither sought nor obtained.

Supply numbers provided by Johnson Matthey are for metals entering the market and do not necessarily represent metals produced during the years shown. For palladium this may constitute a significant year-to-year difference because of unpredictable releases out of the strategic inventories held by the Russian Federation, as well as those held by the auto companies and investors. For platinum this inventory effect is less significant, as inventories held by governments or private institutions have not been as material recently. According to Johnson Matthey, annual worldwide mine production of palladium for 2010 is estimated at 6.13 million ounces, essentially even with the 6.14 million ounces produced in 2009. Annual worldwide production of platinum for 2010 is estimated at 6.01 million ounces, down very slightly from about 6.025 million ounces in 2009.

Johnson Matthey comments that the outlook for palladium in the future is sensitive to activity from the Russian state inventories. Their outlook assumes that there were additional Russian inventory sales during 2010, although they did not result in any significant market surplus for palladium. However, they also note that investors seem to be aware of the imbalance between palladium mine production and demand, and some appear to anticipate supply imbalances over the longer term if the Russian inventory sales end.

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In addition to mine sources, PGMs are recovered from automotive catalytic converters acquired from scrap dealers. A growing industry has developed in the collection and recovery of PGMs from scrap sources, including automotive catalytic converters, electronic and communications equipment and petroleum catalysts. Volumes were affected by the lower PGM prices during the first half of 2010 but strengthened fairly steadily throughout the year as prices improved. Johnson Matthey estimates 2010 worldwide recoveries from recycling provided 1.85 million ounces of palladium and 1.84 million ounces of platinum, up from 1.43 million ounces of palladium and 1.405 million ounces of platinum in 2009, driven in 2010 by the economic incentive to recycle when metal prices are high.

Prices

Stillwater Mining Company’s revenue and earnings depend significantly on world palladium and platinum market prices. The Company has no direct control over these prices, but is working to foster PGM demand growth by encouraging new uses for these metals. PGM prices can fluctuate widely. The Company does have the ability to hedge prices and until the Ford sales agreement expired on December 31, 2010, benefited from contractual floor prices that tended to mitigate some of the Company’s price exposure. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Revenue” and “Factors That May Affect Future Results and Financial Condition.” The volatility of palladium and platinum prices is illustrated in the following table of the London Bullion Market Association afternoon postings of annual high, low and average prices per ounce since 2001. The accompanying charts also demonstrate this volatility. See “Business, Risk Factors and Properties – Risk Factors – Vulnerability to Metals Price Volatility – Changes in Supply and Demand Could Reduce Market Prices. ”

PALLADIUM PLATINUM YEAR HIGH LOW AVERAGE HIGH LOW AVERAGE

2001 $ 1,090 $ 315 $ 604 $ 640 $ 415 $ 529 2002 $ 435 $ 222 $ 338 $ 607 $ 453 $ 539 2003 $ 269 $ 148 $ 201 $ 840 $ 603 $ 691 2004 $ 333 $ 178 $ 230 $ 936 $ 767 $ 846 2005 $ 295 $ 172 $ 201 $ 1,012 $ 844 $ 897 2006 $ 404 $ 261 $ 320 $ 1,355 $ 982 $ 1,143 2007 $ 382 $ 320 $ 355 $ 1,544 $ 1,118 $ 1,303 2008 $ 582 $ 164 $ 352 $ 2,273 $ 763 $ 1,576 2009 $ 393 $ 179 $ 264 $ 1,494 $ 918 $ 1,204 2010 $ 797 $ 395 $ 526 $ 1,786 $ 1,475 $ 1,610 2011 $ 824 $ 753 $ 793 $ 1,845 $ 1,722 $ 1,787 * (Through February 9, 2011)

AVAILABLE INFORMATION

The Company’s Internet Website is http://www.stillwatermining.com. The Company makes available, free of charge, through its Internet Website, its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8- K, corporate proxy statements, and any amendments to those reports, as soon as reasonably practicable after the Company electronically files such materials with, or furnishes them to, the Securities & Exchange Commission. These documents will also be provided free of charge in print, upon request.

RISK FACTORS

Set forth below are certain risks faced by the Company.

VULNERABILITY TO METALS PRICE VOLATILITY-CHANGES IN SUPPLY AND DEMAND COULD REDUCE MARKET PRICES

Because essentially the Company’s primary source of revenue is the sale of platinum group metals, changes in the market price of platinum group metals may significantly affect profitability. Many factors beyond the Company’s control influence the market prices of these metals. These factors include global supply and demand, speculative activities, international political and economic conditions, currency exchange rates, and production levels and costs in other PGM- producing countries, principally Russia and South Africa.

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Over the past several years, the market price of palladium has been extremely volatile. After reaching a record high price level of $1,090 per ounce in January 2001, the price of palladium declined over a 27-month period until hitting a low of $148 per ounce in April 2003. Thereafter, the price gradually recovered, posting a high of $582 per ounce in April 2008 and then declining sharply to a low of $164 per ounce in December 2008. Palladium prices recovered significantly during 2009 and 2010, ending the year 2010 at $797 per ounce. As of February 9, 2011, the market price of palladium (based on the London Bullion Market Association afternoon fixing) was $835 per ounce.

The market price of platinum trended generally upward from $440 per ounce at the end of 2001 to $1,530 at the end of 2007. In late January 2008, following the announcement of electrical power shortages in South Africa, the price rose sharply, peaking in March 2008 at $2,273 per ounce in London. Beginning in June 2008, however, the price declined steeply as the economy deteriorated in the second half of 2008, hitting a low of $756 per ounce before ending 2008 at $898 per ounce. During 2009 and 2010, prices generally recovered, and platinum ended 2010 quoted in London at $1,755 per ounce. On February 9, 2011, the London Bullion Market Association afternoon fixing for platinum was $1,858 per ounce.

A prolonged or significant economic contraction in the United States or worldwide could put further downward pressure on market prices of PGMs, particularly if demand for PGMs declines in connection with reduced automobile demand and more restricted availability of investment credit. If other producers or investors release substantial volumes

38 of platinum group metals from stockpiles or otherwise, the increased supply could reduce the prices of palladium and platinum. Changes in currency exchange rates, and particularly a significant weakening of the South African rand, could reduce relative costs of production and improve the competitive cost position of South African PGM producers. This in turn could make additional PGM investment attractive in South Africa and reduce the worldwide competitiveness of the Company’s North American operations.

Reductions in PGM prices would adversely affect the Company’s revenues, profits and cash flows. Protracted periods of low metal prices could significantly reduce revenues and the availability of required development funds to levels that could cause portions of the Company’s ore reserves and production plan to become uneconomic. This could cause substantial reductions to PGM production or suspension of mining operations, impair asset values, and reduce the Company’s proven and probable ore reserves. See “Business, Risk Factors and Properties – Competition: Palladium and Platinum Market” for further explanation of these factors.

Extended periods of high commodity prices may create economic dislocations that may be destabilizing to PGM supply and demand and ultimately to the broader markets. Periods of high PGM market prices generally are beneficial to the Company’s current financial performance. However, strong PGM prices also create economic pressure to identify or create alternate technologies that ultimately could depress future long-term demand for PGMs, and at the same time may incentivize development of otherwise marginal mining properties. Similarly, markets for PGM jewelry are primarily driven by discretionary spending that tends to decline during periods of high prices and may drive the industry toward developing new, more affordable jewelry materials. See “Risk Factors – Users of PGMs May Reduce Their Consumption and Substitute Other Materials for Palladium and Platinum” for additional discussion of these risks.

THE COMPANY NO LONGER HAS CONTRACTUAL FLOOR PRICES AND NOW HAS FIXED DELIVERY COMMITMENTS IN ITS SUPPLY AGREEMENTS

The Company’s revenues for the year ended December 31, 2010, included 68.5% from mine production. The Company no longer is party to sales agreements that contain pricing floors which in the past provided financial protection against significant declines in the price of palladium. As a result, the Company is now fully exposed to any extended downturn in PGM prices. While the Company has sought to mitigate this exposure by improving its relative cost profile and by maintaining substantial balance sheet liquidity, there can be no assurance that these measures would be sufficient in the event of an extended period of low PGM prices.

The Company’s prior major sales agreements largely were based on delivery commitments tied to percentages of mine production volumes in each month. As a result, the Company had only limited exposure to shortfalls in mine production. The Company now is entering into agreements with fixed delivery commitments each month, and should there be an operating shortfall in any month that leaves the Company short of its delivery commitments, the Company could be required to purchase metal in the open market to make up the delivery shortfall. Such purchases could entail substantial losses if the market price moved adversely during the shortfall month.

Effective January 1, 2011, the Company has entered into a new three-year supply agreement with GM that provides for fixed quantities of palladium to be delivered to GM each month. The new agreement does not include price floors or caps, but provides for pricing at a small discount to a trailing market price. (The specific commercial provisions of the agreement are contractually confidential.) The Company has also entered into an agreement with BASF Corporation under similar terms. The Company is attempting to negotiate potential supply arrangements with other large PGM consumers but does not believe these agreements are likely to include pricing floors. Such agreements are likely to require delivery of specified quantities of PGMs in each delivery period. Pending execution of any further sales agreements, the Company is selling most of its remaining mine production under month-to-month and spot sales arrangements.

For more information about the Company’s sales agreements, see “Business, Risk Factors and Properties – Current Operations – PGM Sales and Hedging.” For additional discussion of hedging risks, see “Risk Factors – Hedging and Sales Agreements Could Limit the Realization of Higher Metal Prices.”

In its recycling business, the Company regularly enters into fixed forward sales and from time to time into financially settled forward contracts for metal produced from catalyst recycling, normally at the time the catalyst material is purchased. For the Company’s fixed forward sales related to recycling of catalysts, the Company is subject to the customers’ compliance with the terms of the agreements, their ability to terminate or suspend the agreements and their willingness and ability to pay. The loss of any of these agreements or failure of a counterparty to perform could require

39 the Company to sell or purchase the contracted metal in the open market, potentially at a significant loss. The Company’s revenues for the year ended December 31, 2010, included 30.3% from recycling sales and 1.1% from other sales.

FAILURE TO SECURE SALES AGREEMENTS FOR OUNCES PRODUCED FROM MINE PRODUCTION LEAVES THE COMPANY EXPOSED TO SPOT MARKET TRADING

Based on its trading experience, the Company believes it could readily sell all of its current mine production on a spot basis into terminal markets with virtually no detrimental effect on market prices. Nevertheless, such markets are not entirely predictable, and the absence of firm sales commitments leaves the Company exposed to the vagaries of market demand. If demand for PGMs were to fall sufficiently, the Company could be compelled to sell its uncommitted production at a loss, perhaps putting further downward pressure on prices at the same time. The Company intends to enter into additional supply agreements to cover a substantial portion of its mined PGM production, but there can be no assurance at this time that the Company will be able to do so. If the selling price of PGMs proves insufficient over an extended period to cover the Company’s operating and capital costs of production, the Company’s operations might have to be curtailed, suspended or closed.

RELIANCE ON A FEW THIRD PARTIES FOR SOURCING OF RECYCLING MATERIALS AND ADVANCES FOR RECYCLING MATERIALS CREATES THE POTENTIAL FOR LOSSES

The Company has available smelter and base metal refinery capacity and purchases catalyst materials from third parties for recycling activities to recover PGMs. The Company has entered into sourcing arrangements for catalyst material with several suppliers, one of which both brokers and supplies directly a large share of the Company’s catalyst for recycling. The Company is subject to the suppliers’ compliance with the terms of these arrangements and their ability to terminate or suspend the agreement. Should one of these sourcing arrangements be terminated, the Company could suffer a loss of profitability as a result of the termination. This loss could negatively affect the Company’s business and results of operations. Similarly, these suppliers source material from various third parties in a competitive market, and there can be no assurance of the suppliers’ continuing ability to source material on behalf of the Company at current volumes and prices. Any continuing issue associated with the suppliers’ ability to source material could reduce the Company’s profitability.

Under these sourcing arrangements, the Company advances cash to support the purchase and collection of these spent catalyst materials. These advances are reflected as advances on inventory purchases and included in Other current assets on the Company’s balance sheet until such time as the material has been received and title has transferred to the Company. In some cases, the Company has a security interest in the materials that the suppliers have procured but the Company has not yet received. However, a portion of the advances are unsecured and the unsecured portion of these advances is fully at risk.

The Company regularly advances money to its established recycling suppliers for catalyst material that the Company has received and carries in its processing inventories. These advances typically represent some portion of the estimated total value of each shipment until assays are completed determining the actual PGM content of the shipment. Upon completion of the shipment assays, a final settlement takes place based on the actual value of the shipment. However, pending completion of the assays the payments are based on the estimated PGM content of each shipment, which may vary significantly from the actual PGM content upon assay. Should the estimated PGM content upon assay significantly exceed the actual PGM content, the Company may be at risk for a portion of the amount advanced. This risk normally is mitigated by the established nature of the business relationship with the supplier, but should the supplier be unable to settle such an overpayment, the Company could incur a loss to the extent of any overpayment.

Following the sharp decline in PGM prices during the second half of 2008, the volume of spent catalyst material received from the Company’s recycling suppliers diminished significantly. This was an industry-wide trend in which some of the suppliers incurred significant inventory losses, and a few even exited the business. Following the decline in PGM prices and doubts as to collectability under various commitments with suppliers, the 2010, 2009 and 2008 recycling results included write-downs of $0.6 million, $0.5 million and $26.0 million, respectively, of advances to suppliers in its recycling business. Subsequently, the Company has restructured its recycling business model in an effort to reduce the need for unsecured advances. However, there can be no assurance that the Company will not incur additional recycling losses in the future.

Over the past two or three years, the Company has installed new recycling facilities that are intended to facilitate growing the volumes of recycled material that the Company can effectively sample, assay and process. The Company

40 believes that a business model that allows much faster turnaround of assay results than is typical in the industry now will provide some competitive advantage in growing the volumes of recycling material coming to the Company. However, there is no assurance that this assumption is correct or that the Company’s revised business model will be widely accepted within the industry, particularly in view of the practice of some of the Company’s competitors of offering significant cash working capital advances to their suppliers well ahead of receiving material from those suppliers.

AN EXTENDED PERIOD OF LOW RECYCLING VOLUMES AND WEAK PGM PRICES COULD PUT THE COMPANY’S OPERATIONS AT ADDITIONAL RISK

The Company’s recycling segment generates supplemental earnings and cash flow to help support the economics of the mining business when PGM prices are low. The recycling segment in turn depends upon the copper and nickel produced in mine concentrates to extract the PGMs in recycled material within the Company’s processing facilities. The economics of the recycling segment to a large extent have been regarded as incremental within the processing operations, with the result that the recycling business is allocated only an incremental share of the total cost of the processing facilities.

Volumes of recycling materials available in the marketplace diminished substantially in response to the drop in PGM prices in late 2008 and early 2009. These lower recycling volumes resulted in less earnings and cash flow from the recycling segment, and therefore less economic support for the mining operations. Should it become necessary at any point to reduce or suspend operations at the mines, the proportion of processing costs allocated to the recycling segment would increase substantially, making the recycling segment less profitable. Further, the ability to operate the smelter and refinery without significant volumes of mine concentrates has never been demonstrated and would likely require modification to the processing facilities. There is no assurance that the recycling facilities can operate profitably in the absence of significant mine concentrates, or that capital would be available to complete necessary modifications to the processing facilities.

THE COMPANY MAY BE COMPETITIVELY DISADVANTAGED AS A PRIMARY PGM PRODUCER WITH A PREPONDERANCE OF PALLADIUM

The Company’s products compete in a global market place with the products of other primary producers of PGMs and with companies that produce PGMs as a by-product. In many cases, the other primary producers mine ore reserves with a higher ratio of platinum to palladium than the Company and as a result enjoy higher average realizations per ounce than Stillwater Mining Company. The Company also competes with mining companies that produce PGMs as a by- product of their primary commodity, principally nickel.

Because the Company’s U.S. based cost structure is denominated in dollars, in periods when the U.S. dollar is relatively strong, the Company’s competitors may still operate profitably, while the Company may not. Furthermore, non-primary producers of PGMs who regard PGMs as a by-product will generally continue to produce and sell PGMs when prices are low, as PGMs are not their principal commodity.

The high correlation between the Company’s share price and the market price of palladium suggests that the Company is widely viewed by investors as a surrogate for investing directly in palladium. The Company has focused considerable attention on identifying attractive opportunities to acquire additional PGM assets, with the intent hopefully of providing shareholders with accretive growth and so increasing shareholder value. However, the availability of attractive acquisition opportunities in PGMs is quite limited, particularly on a scale that the Company can reasonably manage. Consequently, the opportunity for growth may be limited without stepping outside PGMs. The Company has advised its shareholders on various occasions that it may need to pursue investments in non-PGM assets, such as gold, silver, copper and nickel or combinations thereof, where in management’s view they may make strategic sense and not materially detract from the Company’s basic PGM profile. Of course, there is no assurance that the Company will succeed in acquiring additional attractive properties, whether or not PGM based, or that it will necessarily have the resources in the future to do so.

ACHIEVEMENT OF THE COMPANY’S PRODUCTION GOALS IS SUBJECT TO UNCERTAINTIES

Based on the complexity and uncertainty involved in operating underground mines, it is challenging to provide accurate production and cost forecasts. The Company cannot be certain that either the Stillwater Mine or the East Boulder Mine will achieve the production levels forecasted or that the expected operating cost levels will be achieved or that funding will be available from internal and external sources in requisite amounts or on acceptable terms to sustain the

41 necessary ongoing development work. Failure to achieve the Company’s production forecast negatively affects the Company’s revenues, profits and cash flows. As the extent of underground operations continues to expand at depth and horizontally, it is likely that operating costs will increase unless productivity is increased commensurately. Also, as additional underground infrastructure is constructed, amortization expense may increase unless additional ore reserves are identified. Such increased costs could adversely affect the Company’s profitability.

The East Boulder Mine commenced commercial operations in 2002 and has never reached its original planned 2,000 ton-per-day operating rate on a sustained basis. Ore grades at the East Boulder Mine also are typically lower than comparable grades at the Stillwater Mine. Partially as a result, production costs per ounce at the East Boulder Mine have generally been significantly higher than at the Stillwater Mine. The Company has put in place various operating plans and programs that are intended to reduce production costs at both the East Boulder Mine and the Stillwater Mine; however, there can be no assurance that these plans and programs will be implemented effectively. Actual production, cash operating costs and economic returns achieved in the future may differ significantly from those currently estimated or those established in future studies and estimates.

During 2007 and 2008, attrition rates at the Stillwater and East Boulder Mines exceeded already high historical experience, resulting in shortages of skilled miners and disruptions to mining efficiency. With the more difficult economic conditions during 2009, the Company saw these attrition rates decline to levels well below the historical trend, with accompanying improvements in productivity. Employee attrition rates during 2010 were essentially comparable to those in 2009. While the Company believes that the improvements in productivity realized during 2009 were attributable to more than just a more stable workforce, if the economy recovers significantly in the future, the competition for skilled miners may resume and the Company may see its employee attrition rates climb. This in turn could prove disruptive to the Company’s workforce and result in lower productivity. See “Risk Factors – Limited Availability of Additional Mining Personnel and Uncertainty of Labor Relations May Affect the Company’s Ability to Achieve Its Production Targets” below for further discussion of this and related issues.

ORE RESERVES ARE VERY DIFFICULT TO ESTIMATE AND ORE RESERVE ESTIMATES MAY REQUIRE ADJUSTMENT IN THE FUTURE; CHANGES IN ORE GRADES, MINING PRACTICES AND ECONOMIC FACTORS COULD MATERIALLY AFFECT THE COMPANY’S PRODUCTION AND REPORTED RESULTS

Ore reserve estimates are necessarily imprecise and depend to some extent on statistical inferences drawn from limited drilling, which may prove unreliable. Reported ore reserves are comprised of a proven component and a probable component. (See Glossary for definitions.) For proven ore reserves, distances between samples can range from 25 to 100 feet, but are typically spaced at 50-foot intervals both horizontally and vertically. The sample data for proven ore reserves consists of survey data, lithologic data and assay results. The Company enters this data into a 3-dimensional modeling software package, where it is analyzed to produce a 3-dimensional solid block model of the resource. The assay values are further analyzed by a geostatistical modeling technique (kriging) to establish a grade distribution within the 3- dimensional block model. Dilution is then applied to the model and a diluted tonnage and grade is calculated for each block.

Probable ore reserves are based on longer projections, up to a maximum radius of 1,000 feet beyond the limit of existing drill-hole sample intercepts of the J-M Reef obtained from surface and underground drilling. Statistical modeling and established continuity of the J-M Reef as determined from results of mining activity to date support the Company’s technical confidence in estimates of tonnage and grade over this projection distance. Where appropriate, projections for the probable ore reserve determination are constrained by any known or anticipated restrictive geologic features. The probable ore reserve estimate of tons and grade is based on the projection of factors calculated from adjacent proven ore reserve blocks or from diamond drilling data where available. The factors consist of a probable area, proven yield in tons per foot of footwall lateral, average grade and percent mineable. The area is calculated based on projections up to a maximum of 1,000-feet from known drill contacts; the proven yield (in tons per foot of footwall lateral) and grade are calculated based on long-term proven ore reserve results in adjacent areas; and the percent mineable is calculated based on long-term experience from actual mining in adjacent areas. Contained ounces are calculated based on area divided by 300 (square feet) times proven yield in tons per foot of footwall lateral times grade (ounces per ton) times percent mineable (%). As a result, probable ore reserve estimates are less reliable than estimates of proven ore reserves. Both proven and probable ore reserve projections are also limited where appropriate by certain modifying factors, including geologic evidence, economic criteria and mining constraints.

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Conversion of probable ore reserves to proven ore reserves is calculated by dividing the actual proven tons converted for a given area by the expected tonnage based on a probable yield expectation for that given area. Actual period-to- period conversion of probable ore reserves to proven ore reserves may result in increases or decreases to the total reported amount of ore reserves. Conversion, an indicator of the success in upgrading probable ore reserves to proven ore reserves, is evaluated annually as described under “Business, Risk Factors, and Properties - Proven and Probable Ore Reserves”. Conversion rates are affected by a number of factors, including geological variability, quantity of tonnage represented by the period drilling, applicable mining methods and changes in safe mining practices, economic considerations and new regulatory requirements.

The following table illustrates, for each year’s development program, the actual percent conversion rates of probable ore reserve into tons experienced by year from 2001 through 2010:

Historic Year ended Weighted December 31, Average (2) 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 (in percent)

Stillwater Mine 88 70 83 74 68 94 101 62 52 71 104

(1) East Boulder Mine 95 97 24 71 107 91 110 125 86 91 88

(1) The East Boulder Mine commenced full-time commercial production on January 1, 2002. (2) Historic Weighted Average period is 1997 to 2010.

Ore reserve estimates are expressions of professional judgment based on knowledge, experience and industry practice. The Company cannot be certain that its estimated ore reserves are accurate, and future conversion and production experience could differ materially from such estimates. Should the Company encounter mineralization or formations at any of its mines or projects different from those predicted by drilling, sampling and similar examinations, reserve estimates may have to be adjusted and mining plans may have to be altered in a way that might adversely affect the Company’s operations. Declines in the market prices of platinum group metals may render the mining of some or all of the Company’s ore reserves uneconomic. The grade of ore may vary significantly from time to time and between the Stillwater Mine and the East Boulder Mine, as with any mining operation. The Company cannot provide assurance that any particular quantity of metal may be recovered from the ore reserves. Moreover, short-term factors relating to the ore reserves, such as the availability of production workplaces, the need for additional development of the ore body or the processing of new or different ore types or grades, may impair the Company’s profitability in any particular accounting period.

AN EXTENDED PERIOD OF LOW PGM PRICES COULD RESULT IN A REDUCTION OF ORE RESERVES AND POTENTIAL FURTHER ASSET IMPAIRMENT CHARGE

The Company reviews and evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts of its assets may not be recoverable. Impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the asset. Estimations of future cash flows take into account estimates of recoverable ounces, PGM prices (considering current and historical prices, long-term sales contracts prices, price trends and related factors), production levels and capital and reclamation expenditures, all based on life-of-mine plans and projections.

If the Company determines that the carrying value of a long-lived asset is not recoverable and the asset is impaired, then the Company must determine the fair value of the impaired asset. If fair value is lower than the carrying value of the assets, then the carrying value must be adjusted down to the fair value. If the fair value of the impaired asset is not readily determinable through equivalent or comparable market price information, the Company normally engages the services of third-party valuation experts to develop or corroborate fair value assessments.

Were the Company to experience a prolonged period of low PGM prices adversely affecting the determination of ore reserves, the Company could face one or more impairment adjustments. Assumptions underlying future cash flows are subject to risks and uncertainties. Any differences between projections and actual outcomes for key factors such as PGM prices, recoverable ounces, and/or the Company’s operating performance could have a material effect on the Company’s ability to recover the carrying amounts of its long-lived assets, potentially resulting in impairment charges in the future. The Company has estimated that as of December 31, 2010, the combined long-term PGM market price level below which ore reserves start to be constrained economically is about $530 per ounce. See “Business, Risk Factors and Properties – Proven and Probable Ore Reserves” for a chart illustration.

43

Lower prices also can affect the economic justification of ore reserves. The Company reviews its ore reserves annually and has reviewed them as of December 31, 2010. As in past years, the Company also engaged Behre Dolbear as third-party independent geological experts to review and express their opinion on the Company’s reserve calculations. The Company performs its ore reserve economic assessment using a twelve-quarter trailing price in order to level out short-term volatility in metals prices, viewing the twelve-quarter trailing average as a reasonable surrogate for long-term future PGM prices over the period when the reserves will be mined. The Company’s combined twelve-quarter trailing weighted average price for platinum and palladium at December 31, 2010, was about $624 per ounce. At this price, the Company’s geologic ore reserves at each mine can be shown to generate (undiscounted) positive cash flow over the life of the reserve. Consequently, the Company’s ore reserves were not constrained economically at December 31, 2010.

It is important to note that if PGM prices were to fall for an extended period, the trailing twelve-quarter price will gradually decline. Following the Company’s methodology, there can be no assurance that the Company’s reported proven and probable ore reserves will not be constrained economically in the future.

USERS OF PGMS MAY REDUCE THEIR CONSUMPTION AND SUBSTITUTE OTHER MATERIALS FOR PALLADIUM AND PLATINUM

High PGM prices may lead users of PGMs to substitute other materials for palladium and platinum or to reduce the amounts they consume. The automobile, jewelry, electronics and dental industries are the largest consumers of palladium. All of these applications are sensitive to prices. In response to supply concerns and high market prices for palladium, some automobile manufacturers in the past have sought alternatives to palladium, although no practical alternatives to palladium, platinum and rhodium in automotive catalytic converters have been identified to date. There has been some substitution in the past of other metals for palladium in electronics and dental applications. High platinum prices likewise tend to reduce demand by driving users toward alternative metals. The principal demand for platinum is in the automobile and chemical industries and for jewelry. Substitution in these industries may increase significantly if PGM market prices rise or if supply becomes unreliable. Significant substitution for any reason, in the absence of alternative uses for PGMs being identified, could result in a material and sustained PGM price decrease, which would negatively affect the Company’s revenues and profitability.

High PGM prices also drive users toward ever more efficient utilization of PGMs. In the past, the development of new flow geometries and substrate configurations have resulted in “thrifting down” the amount of PGMs in catalytic converters required to meet emission standards. Recently, apparently in response to high PGM prices, certain PGM consumers have announced new nanotechnology applications that may allow further significant reductions in the volume of PGMs required in each catalytic converter. These emerging applications could tend to drive down PGM demand in the future and result in lower PGM prices.

To the extent existing and future environmental regulations tend to create disincentives for the use of internal combustion engines, demand for platinum and palladium in automotive catalytic converters could be reduced. This in turn could drive down PGM prices and could impair the Company’s financial performance.

IF THE COMPANY IS UNABLE TO OBTAIN SURETY COVERAGE TO COLLATERALIZE ITS RECLAMATION LIABILITIES, OPERATING PERMITS MAY BE AFFECTED

The Company is required to post surety bonds, letters of credit, cash or other acceptable financial instruments to guarantee the future performance of reclamation activities at its operating mines. The total availability of bonding capacity from the U.S. insurance industry is limited. During 2008, the State of Montana increased the required bonding levels at the Company’s mining operations and is expected to require an additional increase in the future. The aggregate surety amount in place at the East Boulder Mine was $13.7 million at the end of 2010, comprised of $6.2 million of surety bonds and a $7.5 million letter of credit. At December 31, 2010, the Stillwater Mine carried reclamation bonds totaling $19.6 million, including an increase of $10.0 million voluntarily put in place during the fourth quarter of 2008, pending the outcome of the current EIS being completed by the State of Montana. Should increased bonding requirements be imposed in the future and the Company find itself unable to obtain the required bonds or otherwise provide acceptable surety, the ability to operate under existing operating permits would likely be curtailed, which could have a significant adverse affect on the Company’s operations.

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MINING RISKS AND POTENTIAL INADEQUACY OF INSURANCE COVERAGE - THE COMPANY’S BUSINESS IS SUBJECT TO SIGNIFICANT RISKS THAT MAY NOT BE COVERED BY INSURANCE

Underground mining and milling, smelting and refining operations involve a number of risks and hazards, including:

• unusual and unexpected rock formations affecting ore or wall rock characteristics; • ground or slope failures; • cave-ins, ground water influx, rock bursts and other mining or ground-related problems; • environmental hazards; • industrial accidents; • organized labor disputes or work slow-downs; • metallurgical and other processing, smelting or refining problems; • wild fires, flooding and periodic interruptions due to inclement or hazardous weather conditions or other acts of God; • mechanical equipment failure and facility performance problems, and • availability and cost of critical materials, equipment and skilled manpower.

Such risks could result in damage to, or destruction of, mineral properties or production facilities, personal injury or death, environmental damage, delays in mining or processing, monetary losses and possible legal liability. Some fatal accidents and other non-fatal serious injuries have occurred at the Company’s mines since operations began in 1986. Future industrial accidents or occupational disease occurrences could have a material adverse effect on the Company’s business and operations. The Company cannot be certain that its insurance will cover certain risks associated with mining or that it will be able to maintain insurance to cover these risks at economically feasible premiums. The Company might also become subject to liability for environmental damage or other hazards which may be uninsurable or for which it may elect not to insure because of premium costs or commercial impracticality. Such events could result in a prolonged interruption in operations that would have a negative effect on the Company’s ability to generate revenues, profits, and cash flow.

HEDGING AND SALES AGREEMENTS COULD LIMIT THE REALIZATION OF HIGHER METAL PRICES

The Company enters into derivative contracts and other hedging arrangements from time to time in an effort to reduce the negative effect of price changes on its cash flow. These arrangements typically consist of contracts that require the Company to deliver specific quantities of metal, or to financially settle the obligation in the future, at specific prices. The Company may also hedge pricing through the sale of call options and the purchase of put options. See “Business, Risk Factors and Properties – Current Operations – PGM Sales and Hedging” for a discussion of the Company’s hedge positions. While hedging transactions are intended to reduce the negative effects of price decreases, they have also prevented the Company at times from benefiting fully from price increases. If PGM prices are above the price at which future production has been hedged, the Company will experience an opportunity loss upon settlement.

CHANGES TO REGULATIONS AND COMPLIANCE WITH REGULATIONS COULD AFFECT PRODUCTION, INCREASE COSTS AND CAUSE DELAYS

The Company’s business is subject to extensive federal, state and local environmental controls and regulations, including regulations associated with the implementation of the Clean Air Act, Clean Water Act, Resource Conservation and Recovery Act, Metals Mines Reclamation Act and numerous permit stipulations as documented in the Record of Decision for each operating entity. Properties controlled by the Company in Canada are subject to analogous Canadian federal and provincial controls and regulations. The body of environmental laws is continually changing and, as a general matter, is becoming more restrictive. Compliance with these regulations requires the Company to obtain permits issued by federal, state, provincial and local regulatory agencies. Certain permits require periodic renewal and/or review of the Company’s performance. The Company cannot predict whether it will be able to secure or renew such permits or whether material changes in permit conditions will be imposed. Nonrenewal of permits, the inability to secure new permits, or the imposition of additional conditions could eliminate or severely restrict the Company’s ability to conduct its operations. See “Business, Risk Factors and Properties – Current Operations – Regulatory and Environmental Matters.”

Compliance with existing and future environmental laws and regulations may require additional control measures and expenditures, which the Company cannot reasonably predict. Environmental compliance requirements for new or expanded mining operations may require substantial additional control measures that could materially affect permitting and proposed construction schedules for such facilities. Under certain circumstances, facility construction may be

45 delayed pending regulatory approval. Expansion plans or new mining and processing facilities may require new environmental permitting. Private parties may pursue successive legal challenges to the Company’s existing or proposed permits. See “Business, Risk Factors and Properties – Current Operations – Regulatory and Environmental Matters.”

The Company’s activities are also subject to extensive federal, state, provincial and local laws and regulations governing matters relating to mine safety, occupational health, labor standards, prospecting, exploration, production, exports, smelting and refining operations and taxes. Compliance with these and other laws and regulations, including requirements implemented under guidance from of the U.S. Department of Homeland Security, could require additional capital outlays, which could negatively affect the Company’s cash flow.

The Company’s mining operations are located adjacent to the Absaroka-Beartooth Wilderness Area and are situated approximately 30 miles from the northern boundary of Yellowstone National Park. While the Company works closely and cooperatively with local environmental organizations, the Montana Department of Environmental Quality and the United States Forest Service, there can be no assurance that future political or regulatory efforts will not further restrict or seek to terminate the Company’s operations in this sensitive area.

For the past several years, the Company has employed various measures in an effort to protect the health of the Company’s workforce and to comply with much stricter MSHA limits on DPM exposure for the underground miners. These measures have included using catalytic converters, filters, enhanced ventilation regimens, modifying certain mining practices underground, and the utilization of various bio-diesel blends. The new DPM limits were delayed for a time, but ultimately went into effect on May 20, 2008. Compliance with the revised MSHA DPM standards continues to be a challenge within the mining industry. However, as a result of its internal efforts to reduce DPM exposure, recent sampling indicates that the Company has achieved compliance with the new standards at both the Stillwater Mine and the East Boulder Mine. No assurance can be given that any lack of compliance in the future will not impact the Company.

Various legislative initiatives have been introduced and, in some cases, enacted mandating additional safety and health measures for mining employees and providing stronger penalties for failure to comply. The Company believes it has a highly effective safety program in place for its employees, but there can be no assurance that the Company will be in compliance with future legislated initiatives or that the Company will not incur significant penalties under these initiatives.

THE COMPANY’S CREDIT RATING IS BELOW INVESTMENT GRADE AND FUTURE INTEREST RATES ARE UNCERTAIN, POTENTIALLY LIMITING FUTURE CREDIT AVAILABILITY AND/OR INCREASING POTENTIAL BORROWING COSTS; AND OTHER FACTORS THAT MAY AFFECT THE COMPANY

Stillwater Mining Company’s credit rating currently is below investment grade and is not expected to achieve investment grade in the immediate future. The rating agencies at various times have expressed concern regarding the Company’s lack of operating diversity, the recent termination of its sales agreements, its relatively narrow cash operating margins and volatile pricing environment. The Company’s low credit rating will likely make it difficult and more costly to obtain some forms of third-party financing in the future. Although the Company believes it has adequate liquidity available at the current time, should the Company need to access the credit markets in the future, the Company’s lower credit rating would likely be an impediment to obtaining additional debt or lines of credit at reasonable rates. The Company does not have a revolving credit facility in place at this time. Should the Company require additional credit capacity in the future and be unable to obtain it, the Company might not be able to meet its obligations as they come due and so could be compelled to restructure or seek protection from creditors.

Interest rates at present are near historic lows, and borrowing costs appear likely to rise in the future in step with any improvement in economic conditions. While there appears to be ample liquidity available at this time, as the economy strengthens and the government takes steps in the future to rein in liquidity, the availability of credit may tighten and the Company may experience limits on its ability to secure external financing. This in turn could constrain the Company’s ability financially to develop new operations or, in the extreme, to maintain its existing operations.

A related risk is that the underlying rate of general inflation, or the specific cost of certain materials necessary for the Company’s operations, may increase in the future. This in turn could squeeze the Company’s operating margins and sharply increase the cost of developing new operations. While the commodity nature of the Company’s products may serve as a partial hedge against underlying inflation, there can be no assurance that the Company’s costs would not rise faster than the value of its products in such an environment.

46

On December 13, 2010, Norimet Ltd., a wholly-owned subsidiary of MMC Norilsk Nickel (Norilsk) and the Company’s majority shareholder, completed a $971 million secondary offering of Stillwater shares in the public market and so disposed of its entire equity interest in the Company. Prior to completion of the offering it was determined that Norimet was unable to locate its original share certificates and the Company, the Company’s transfer agent and affiliates of Norilsk, entered into certain indemnification and ancillary arrangements to protect the Company and its transfer agent from possible claims relating to the issuance of replacement certificates. For additional information about these arrangements, see Note 19 to the Company’s consolidated financial statements for a discussion of potential exposure to losses that the Company could suffer.

LIMITED AVAILABILITY OF ADDITIONAL MINING PERSONNEL AND UNCERTAINTY OF LABOR RELATIONS MAY AFFECT THE COMPANY’S ABILITY TO ACHIEVE ITS PRODUCTION TARGETS

The Company’s operations depend significantly on the availability of qualified miners. Historically, the Company has experienced periods of high turnover with respect to its miners, particularly during the strong metal markets of 2007 and early 2008. In addition, the Company must compete for individuals skilled in the operation and development of underground mining properties. The number of such persons is limited, and significant competition exists to obtain their skills. The Company cannot be certain that it will be able to maintain an adequate supply of miners and other personnel or that its labor expenses will not increase as a result of a shortage in supply of such workers. Failure to maintain an adequate supply of miners could result in lower mine production and impair the Company’s financial performance.

The Company had 1,354 employees at December 31, 2010. About 834 employees located at the Stillwater Mine and the Columbus processing facilities are covered by a collective bargaining agreement with USW Local 11-0001, expiring July 1, 2011. As of December 31, 2010, about 225 employees at the East Boulder Mine were covered by a separate collective bargaining agreement with USW Local 11-0001, which will expire on July 1, 2012. There is no assurance that the Company can achieve a timely or satisfactory renewal of either of these agreements as they expire. A strike or other work stoppage by the Company’s represented employees could result in a significant disruption of the Company’s operations and higher ongoing labor costs.

In response to the limited availability of skilled underground miners, beginning in 2005 the Company initiated a new miner training program whereby it has from time to time hired individuals largely inexperienced in mining and provided intensive, supervised training in skills critical to underground mining in the Company’s operations. This training program requires dedicating significant time and personnel to the training effort, and consequently was scaled back significantly during 2009. These new and less experienced miners, even after training, generally will require several years of experience to achieve the productivity level of the Company’s regular mining workforce. There is no assurance that these new miners will achieve the assumed level of productivity as they gain experience, nor that the Company will be able to retain these new workers in the face of other employment opportunities. Because the Company has now cut back on these training programs, the Company is unable to utilize this training pool as a significant source of replacement mining skills.

UNCERTAINTY OF TITLE TO PROPERTIES — THE VALIDITY OF UNPATENTED MINING CLAIMS IS SUBJECT TO TITLE RISK

The Company has a number of unpatented mining and mill site claims. See “Business, Risk Factors and Properties – Current Operations –Title and Royalties.” The validity of unpatented mining claims on public lands is often uncertain and possessory rights of claimants may be subject to challenge. Unpatented mining claims may be located on lands open to appropriation of mineral rights and are generally considered to be subject to greater title risk than other real property interests because the validity of unpatented mining claims is often uncertain and vulnerable to challenges by third parties or the federal government. The validity of an unpatented mining claim or mill site, in terms of its location and its maintenance, depends on strict compliance with a complex body of federal and state statutory and decisional law and, for unpatented mining claims, the existence of a discovery of valuable minerals. In addition, few public records exist to definitively control the issues of validity and ownership of unpatented mining claims or mill sites. While the Company pays annual maintenance fees and has obtained mineral title reports and legal opinions for some of the unpatented mining claims or mill sites in accordance with the mining laws and what the Company believes is standard industry practice, the Company cannot be certain that the mining laws will not be changed nor that the Company’s possessory rights to any of its unpatented claims may not be deemed defective and challenged. Any change in the mining law could include the imposition of a federal royalty provision on unpatented claims, which could have an adverse effect on the Company’s economic performance.

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THE COMPLEXITY OF PROCESSING PLATINUM GROUP METALS POSES OPERATIONAL AND ENVIRONMENTAL RISKS IN ADDITION TO TYPICAL MINING RISKS

The Company’s processing facilities include concentrators at each mine site that grind the ore and extract the contained metal sulfides, and a smelter and base metal refinery located in Columbus, Montana. These processes ultimately produce a PGM filter cake that is shipped for final refining to third party refiners. The Columbus operations involve pyrometallurgical and hydrometallurgical processes that utilize high temperatures, pressures, caustic chemicals and acids to extract PGMs and other metals from the concentrates. These processes also generate waste gases that are scrubbed to eliminate sulfur dioxide emissions. While the environmental and safety performance of these facilities to date has been outstanding, there can be no assurance that incidents such as solution spills, sulfur dioxide discharges, explosions or accidents involving hot metals and product spills in transportation will not occur in the future. Such incidents potentially could result in more stringent environmental or operating restrictions on these facilities and additional expenses to the Company, which could have a negative impact on its results of operations and cash flows. Further, the Company processes virtually all of its metals through these processing facilities, and any incident interrupting processing operations for an extended period would have a material adverse effect on the Company’s performance.

THE ACQUISITION OF THE MARATHON PROPERTIES IN CANADA INTRODUCES SIGNIFICANT NEW UNCERTAINTIES AS TO THE COMPANY’S FUTURE PERFORMANCE AND COMMITMENTS

The Company’s recent acquisition of the PGM assets of Marathon PGM Corporation, although perceived by the Company as an attractive opportunity, also introduces a number of significant risks, all of which must be managed and all or any combination of which could create difficulties for the Company in the future. Among these risks, many of which are not yet fully defined, are the following:

• Some remaining uncertainty as to the ultimate extent, quality, final grade and mineability of the Marathon resource; • Lack of a final engineering study to lock down the capital cost of installing the mine, the equipment required and its availability, the timing of the construction, and access to local infrastructure in support of a future operation; • Uncertainty as to future PGM and copper prices, which could significantly affect the financial viability of the proposed Marathon development; • Need for employees to manage the project and to staff the mining operations, their numbers, required skill sets and availability; • Negotiation of terms for a processing agreement with a third-party copper smelter to take the concentrates produced by the Marathon operations; • Ability to complete project permitting in coordination with the various responsible agencies and affected groups within an acceptable time frame; • Ability to source or acquire the required mine and mill equipment on a timely basis due to long lead times resulting from widespread worldwide mine development; • Availability of required financing for the Marathon project, internally and/or externally, potentially during a period when the Company’s outstanding convertible debentures may need to be refinanced or repaid; • Future significant exposure to exchange rate risk between the Canadian dollar and the U.S. dollar; and • Other factors involving the integration of Marathon into the Company, including various legal, accounting, tax and human resource matters.

While the Company believes to the extent possible it is addressing each of these areas of risk, there can be no assurance that unforeseen matters may not arise that would adversely affect the Company’s ability to effectively manage and develop its Canadian prospects.

ITEM 3

LEGAL PROCEEDINGS

The Company is involved in various claims and legal actions arising in the ordinary course of business, primarily employee lawsuits and employee injury claims. In the opinion of management, the ultimate disposition of these types of matters is not expected to have a material adverse effect on the Company’s consolidated financial position, results of operations or liquidity.

48 PART II

ITEM 5

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

PERFORMANCE GRAPH

The following chart compares the yearly percentage change in the Company’s cumulative total stockholder return on Common Stock, with the cumulative total return on the following indices, assuming an initial investment of $100 on December 31, 2005 and the reinvestment of all dividends: (i) the Russell 2000 and (ii) the Peer Group. The performance shown is not necessarily indicative of future performance.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among Stillwater Mining Company, the Russell 2000 Index and a Peer Group $250

$200

$150

$100

$50

$0 12/05 12/06 12/07 12/08 12/09 12/10

*$100 invested on 12/31/05 in stock or index, including reinvestment of dividends Fiscal year ending December 31

Cumulative Total Return

12/31/06 12/31/07 12/31/08 12/31/09 12/31/10 Stillwater Mining Company $107.95 $83.49 $42.70 $81.94 $184.53 Russell 2000 118.37 116.51 77.15 98.11 124.46 Peer Group 169.07 217.23 86.47 165.26 189.12

Notwithstanding anything to the contrary set forth in any of the Company’s previous or future filings made under the Securities Act of 1933, as amended, or the Exchange Act that might incorporate this report or future filings made by the Company under those statutes, the preceding stock performance graph is not to be incorporated by reference into any such prior filings, nor shall such graph or report be incorporated by reference into any future filings made by the Company under those statutes. The Peer Group referenced above includes Stillwater Mining Company, Anglo Platinum Limited, Impala Platinum Holdings Limited, Lonmin PLC, and North American Palladium Limited.

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ITEM 6

SELECTED FINANCIAL DATA

(in thousands, except per share and current ratio data) 2010 2009 2008 2007 2006 INCOME STATEMENT DATA Revenues Mine production $ 381,044 $ 306,892 $ 360,364 $ 331,277 $ 334,834 PGM recycling 168,612 81,788 475,388 326,394 269,941 Sales of palladium received in Norilsk Nickel transaction - - - - 17,637 Other 6,222 5,752 19,980 15,365 33,366 Total revenues $ 555,878 $ 394,432 $ 855,732 $ 673,036 $ 655,778 Costs and Expenses Costs of metals sold: Mine production 229,986 209,140 283,793 256,942 242,612 PGM recycling (1) 157,310 75,920 448,351 308,567 249,689 Costs of palladium received in Norilsk Nickel transaction - - - - 10,785 Other 6,379 5,741 19,892 14,289 32,300 Total costs of metals sold 393,675 290,801 752,036 579,798 535,386 Depreciation and amortization Mine production 71,121 70,239 82,792 82,396 83,583 PGM recycling 472 178 192 142 100 Total depreciation and amortization 71,593 70,417 82,984 82,538 83,683 General and administrative 35,898 28,926 70,816 28,285 28,018 Impairment of property, plant and equipment - - 67,254 - - Operating income (loss) $ 54,712 $ 4,288 $ (117,358) $ (17,585) $ 8,691 Induced conversion loss $ - $ (8,097) $ - $ - $ - Total income tax benefit (provision) $ - $ 30 $ 32 $ - $ (10) Net income (loss) $ 50,365 $ (8,655) $ (115,797) $ (16,913) $ 8,684 Other comprehensive income (loss), net of tax $ (762) $ 70 $ 5,865 $ 9,578 $ 1,799 Comprehensive income (loss) $ 49,603 $ (8,585) $ (109,932) $ (7,335) $ 10,483 Weighted average common shares outstanding Basic 97,967 94,852 93,025 92,016 91,260 Diluted 99,209 94,852 93,025 92,016 91,580 Basic earnings (loss) per share $ 0.51 $ (0.09) $ (1.24) $ (0.18) $ 0.10 Diluted earnings (loss) per share $ 0.51 $ (0.09) $ (1.24) $ (0.18) $ 0.09 CASH FLOW DATA Net cash provided by operating activities $ 123,897 $ 59,672 $ 114,243 $ 56,422 $ 96,963 Net cash used in investing activities $ (272,034) $ (54,723) $ (74,567) $ (80,967) $ (78,909) Net cash provided by (used in) financing activities $ 844 $ (88) $ 60,683 $ (2,379) $ (9,954)

(1) Costs from PGM recycling have been revised to include additional recycling costs for the years 2008, 2007, 2006 and 2005. See Note 3 “Correction of Immaterial Error” to the Company’s 2009 and 2008 audited financial statements for further information.

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ITEM 6

SELECTED FINANCIAL DATA

(Continued)

(in thousands, except per share and current ratio data) 2010 2009 2008 2007 2006

BALANCE SHEET DATA Cash and cash equivalents $ 19,363 $ 166,656 $ 161,795 $ 61,436 $ 88,360 Investments $ 188,988 $ 34,515 $ 18,994 $ 27,603 $ 35,497 Inventories $ 101,806 $ 88,967 $ 72,038 $ 118,300 $ 109,188 Total current assets $ 349,367 $ 319,021 $ 282,395 $ 258,568 $ 286,632 Property, plant and equipment, net $ 509,787 $ 358,866 $ 393,412 $ 465,054 $ 460,328 Total assets $ 909,470 $ 725,195 $ 722,889 $ 742,044 $ 758,316 Current portion of long-term debt and capital lease obligations $ - $ - $ 97 $ 1,209 $ 1,674 Total current liabilities $ 58,202 $ 49,476 $ 55,108 $ 68,974 $ 85,590 Long-term debt and capital lease obligations $ 196,010 $ 195,977 $ 210,947 $ 126,841 $ 129,007 Total liabilities $ 326,398 $ 278,384 $ 301,735 $ 225,003 $ 243,467 Stockholders' equity $ 583,072 $ 446,811 $ 421,154 $ 517,041 $ 514,849 Working capital $ 291,165 $ 269,545 $ 227,287 $ 189,594 $ 201,042 Current ratio 6.0 6.4 5.1 3.7 3.3

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2010 2009 2008 2007 2006 OPERATING AND COST DATA (in thousands, except per ounce and per ton costs) Consolidated: Ounces produced: Palladium 374 407 384 413 463 Platinum 111 123 115 124 138 Total 485 530 499 537 601 Tons milled 1,095 1,086 1,060 1,169 1,289 Mill head grade (ounce per ton) 0.48 0.52 0.50 0.50 0.51 Sub-grade tons milled (1) 86 98 146 75 62 Sub-grade mill head grade (ounce per ton) 0.17 0.20 0.17 0.12 0.13 Total tons milled (1) 1,181 1,184 1,206 1,244 1,351 Combined mill head grade (ounce per ton) 0.46 0.50 0.46 0.48 0.49 Total mill recovery (%) 91 91 91 91 91 Total operating costs per ounce (Non-GAAP) (2) $ 331 $ 310 $ 336 $ 268 $ 239 Total cash costs per ounce (Non-GAAP ) (2) $ 397 $ 360 $ 405 $ 330 $ 294 Total production costs per ounce (Non-GAAP) (2) $ 546 $ 495 $ 569 $ 487 $ 431 $ Total operating costs per ton milled (Non-GAAP) (2) $ 136 $ 139 $ 139 $ 116 $ 106 Total cash costs per ton milled (Non-GAAP) (2) $ 163 $ 161 $ 167 $ 143 $ 131 Total production costs per ton milled (Non-GAAP) (2) $ 224 $ 222 $ 236 $ 210 $ 192 Stillwater Mine: Ounces produced: Palladium 271 302 268 274 314 Platinum 81 92 81 85 95 Total 352 394 349 359 409 Tons milled 713 727 690 640 739 Mill head grade (ounce per ton) 0.53 0.58 0.54 0.60 0.60 Sub-grade tons milled (1) 68 50 78 75 62 Sub-grade mill head grade (ounce per ton) 0.18 0.20 0.16 0.12 0.13 Total tons milled (1) 781 777 768 715 801 Combined mill head grade (ounce per ton) 0.50 0.56 0.51 0.55 0.56 Total mill recovery (%) 92 92 91 92 92 Total operating costs per ounce (Non-GAAP) (2) $ 317 $ 297 $ 318 $ 233 $ 227 Total cash costs per ounce (Non-GAAP ) (2) $ 380 $ 344 $ 383 $ 294 $ 280 Total production costs per ounce (Non-GAAP) (2) $ 524 $ 469 $ 521 $ 425 $ 400 Total operating costs per ton milled (Non-GAAP) (2) $ 143 $ 150 $ 144 $ 117 $ 116 Total cash costs per ton milled (Non-GAAP) (2) $ 171 $ 174 $ 174 $ 147 $ 143 Total production costs per ton milled (Non-GAAP) (2) $ 236 $ 238 $ 237 $ 214 $ 204 East Boulder Mine: Ounces produced: Palladium 103 105 116 139 149 Platinum 30 31 34 39 43 Total 133 136 150 178 192 Tons milled 382 359 370 529 550 Mill head grade (ounce per ton) 0.39 0.40 0.42 0.38 0.39 Sub-grade tons milled (1) 18 48 68 - - Sub-grade mill head grade (ounce per ton) 0.15 0.20 0.19 - - Total tons milled (1) 400 407 438 529 550 Combined mill head grade (ounce per ton) 0.37 0.38 0.38 0.38 0.39 Total mill recovery (%) 89 89 90 90 89 Total operating costs per ounce (Non-GAAP) (2) $ 368 $ 347 $ 378 $ 338 $ 264 Total cash costs per ounce (Non-GAAP ) (2) $ 442 $ 407 $ 456 $ 404 $ 324 Total production costs per ounce (Non-GAAP) (2) $ 604 $ 572 $ 682 $ 613 $ 498 Total operating costs per ton milled (Non-GAAP) (2) $ 123 $ 116 $ 130 $ 114 $ 92 Total cash costs per ton milled (Non-GAAP) (2) $ 147 $ 136 $ 156 $ 136 $ 113 Total production costs per ton milled (Non-GAAP) (2) $ 201 $ 191 $ 234 $ 206 $ 174

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(in thousands, where noted) 2010 2009 2008 2007 2006

SALES AND PRICE DATA Ounces sold (000) Mine production: Palladium (oz.) 377 393 399 425 466 Platinum (oz.) 112 123 115 120 138 Total 489 516 514 545 604

PGM recycling: (5) Palladium (oz.) 81 53 119 102 100 Platinum (oz.) 62 40 131 119 127 Rhodium (oz.) 13 9 25 24 22 Total 156 102 275 245 249

Other: (6) Palladium (oz.) 13 12 49 44 96 Platinum (oz.) - 3 - - 3 Rhodium (oz.) - - - - 6 Total 13 15 49 44 105

By-products from mining: (7) Rhodium (oz.) 2 4 2 4 4 Gold (oz.) 9 9 9 11 11 Silver (oz.) 5 6 10 9 6 Copper (lb.) 824 776 940 942 892 Nickel (lb.) 1,157 856 932 1,171 1,585

Average realized price per ounce (3) Mine production: Palladium ($/oz.) $ 495 $ 365 $ 410 $ 384 $ 370 Platinum ($/oz.) $ 1,488 $ 1,137 $ 1,387 $ 953 $ 868 Combined ($/oz.) (4) $ 721 $ 549 $ 630 $ 509 $ 484 PGM recycling: (5) Palladium ($/oz.) $ 456 $ 282 $ 401 $ 353 $ 319 Platinum ($/oz.) $ 1,539 $ 1,143 $ 1,735 $ 1,247 $ 1,124 Rhodium ($/oz.) $ 2,354 $ 2,088 $ 7,807 $ 5,732 $ 4,374

Other: (6) Palladium ($/oz.) $ 479 $ 213 $ 409 $ 351 $ 292 Platinum ($/oz.) $ - $ 1,041 $ - $ - $ 1,028 Rhodium ($/oz.) $ - $ - $ - $ - $ 3,222

By-products from mining: (7) Rhodium ($/oz.) $ 2,503 $ 1,543 $ 7,939 $ 6,217 $ 4,516 Gold ($/oz.) $ 1,223 $ 983 $ 877 $ 699 $ 603 Silver ($/oz.) $ 19 $ 15 $ 14 $ 13 $ 12 Copper ($/lb.) $ 3.24 $ 2.14 $ 2.94 $ 3.34 $ 2.91 Nickel ($/lb.) $ 8.74 $ 7.48 $ 9.72 $ 16.91 $ 10.04

Average market price per ounce (4) Palladium ($/oz.) $ 525 $ 263 $ 352 $ 355 $ 320 Platinum ($/oz.) $ 1,609 $ 1,204 $ 1,578 $ 1,303 $ 1,143 (4) Combined ($/oz.) $ 773 $ 487 $ 628 $ 564 $ 508

(1) Sub-grade tons milled includes reef waste material only. Total tons milled includes ore tons and sub-grade tons only.

(2) Total operating costs include costs of mining, processing and administrative expenses at the mine site (including mine site overhead and credits for metals produced other than palladium and platinum from mine production). Total cash costs include total operating costs plus royalties, insurance and taxes other than income taxes. Total production costs include total cash costs plus asset retirement costs and depletion, depreciation and amortization. Income taxes, corporate general and administrative expenses, asset impairment write-downs, gain or loss on disposal of property,

53

plant and equipment, restructuring costs, interest income and expense are not included in total operating costs, total cash costs or total production costs. Operating costs per ton, operating costs per ounce, cash costs per ton, cash costs per ounce, production costs per ton and production costs per ounce are non-GAAP measurements that management uses to monitor and evaluate the efficiency of its mining operations. These measures of cost are not defined under U.S. Generally Accepted Accounting Principles (GAAP). Please see “Reconciliation of Non-GAAP Measures to Costs of Revenues” and the accompanying discussion for additional detail.

(3) The Company’s average realized price represents revenues, which include the effect of any applicable agreement floor and ceiling prices, hedging gains and losses realized on commodity instruments and agreement discounts, divided by ounces sold. The average market price represents the average London Bullion Market Association afternoon postings for the actual months of the period.

(4) The Company reports a combined average realized and market price of palladium and platinum at the same ratio as ounces that are produced from the base metal refinery.

(5) Ounces sold and average realized price per ounce from PGM recycling relate to ounces produced from processing of catalyst materials.

(6) Ounces sold and average realized price per ounce from other relate to ounces purchased in the open market for resale. Ounces in the year 2006 also included palladium ounces received in the Norilsk Nickel transaction.

(7) By-product metals sold reflect contained metal. Realized prices reflect net values (discounted due to product form and transportation and marketing charges) per unit received.

RECONCILIATION OF NON-GAAP MEASURES TO COSTS OF REVENUES

The Company utilizes certain non-GAAP measures as indicators in assessing the performance of its mining and processing operations during any period. Because of the processing time required to complete the extraction of finished PGM products, there are typically lags from one to three months between ore production and sale of the finished product. Sales in any period include some portion of material mined and processed from prior periods as the revenue recognition process is completed. Consequently, while costs of revenues (a GAAP measure included in the Company’s Consolidated Statement of Operations and Comprehensive Income/ (Loss)) appropriately reflects the expense associated with the materials sold in any period, the Company has developed certain non-GAAP measures to assess the costs associated with its producing and processing activities in a particular period and to compare those costs between periods.

While the Company believes that these non-GAAP measures may also be of value to outside readers, both as general indicators of the Company’s mining efficiency from period to period and as insight into how the Company internally measures its operating performance, these non-GAAP measures are not standardized across the mining industry and in most cases will not be directly comparable to similar measures that may be provided by other companies. These non- GAAP measures are only useful as indicators of relative operational performance in any period, and because they do not take into account the inventory timing differences that are included in costs of revenues, they cannot meaningfully be used to develop measures of profitability. A reconciliation of these measures to costs of revenues for each period shown is provided as part of the following tables, and a description of each non-GAAP measure is provided below.

Total Costs of Revenues: For the Company on a consolidated basis, this measure is equal to consolidated costs of revenues, as reported in the Consolidated Statement of Operations and Comprehensive Income/ (Loss). For the Stillwater Mine, East Boulder Mine, and PGM recycling and other, the Company segregates the expenses within costs of revenues that are directly associated with each of these activities and then allocates the remaining facility costs included in consolidated costs of revenues in proportion to the monthly volumes from each activity. The resulting total costs of revenues measures for the Stillwater Mine, East Boulder Mine and PGM recycling and other are equal in total to consolidated costs of revenues as reported in the Company’s Consolidated Statement of Operations and Comprehensive Income/(Loss).

Total Production Costs (Non-GAAP): Calculated as total costs of revenues (for each mine or consolidated) adjusted to exclude gains or losses on asset dispositions, costs and profit from PGM recycling, and changes in product inventories. This non-GAAP measure provides an indication of the total costs incurred in association with production and processing in a period, before taking into account the timing differences resulting from inventory changes and before any effect of asset dispositions or recycling activities. The Company uses it as a comparative measure of the level of total production and processing activities in a period, and may be compared to prior periods or between the Company’s mines. As noted above, because this measure does not take into account the inventory timing differences that are included in costs of revenues, it cannot be used to develop meaningful measures of earnings or profitability.

When divided by the total tons milled in the respective period, Total Production Cost per Ton Milled (Non- GAAP) – measured for each mine or consolidated – provides an indication of the cost per ton milled in that period. Because of variability of ore grade in the Company’s mining operations, production efficiency underground is frequently

54 measured against ore tons produced rather than contained PGM ounces. And because ore tons are first actually weighed as they are fed into the mill, mill feed is the first point at which production tons are measured precisely. Consequently, Total Production Cost per Ton Milled (Non-GAAP) is a general measure of production efficiency, and is affected both by the level of Total Production Costs (Non-GAAP) and by the volume of tons produced and fed to the mill.

When divided by the total recoverable PGM ounces from production in the respective period, Total Production Cost per Ounce (Non-GAAP) – measured for each mine or consolidated – provides an indication of the cost per ounce produced in that period. Recoverable PGM ounces from production are an indication of the amount of PGM product extracted through mining in any period. Because extracting PGM material is ultimately the objective of mining, the cost per ounce of extracting and processing PGM ounces in a period is a useful measure for comparing extraction efficiency between periods and between the Company’s mines. Consequently, Total Production Cost per Ounce (Non-GAAP) in any period is a general measure of extraction efficiency, and is affected by the level of Total Production Costs (Non- GAAP), by the grade of the ore produced and by the volume of ore produced in the period.

Total Cash Costs (Non-GAAP): This non-GAAP measure is calculated (for each mine or consolidated) as total costs of revenues adjusted to exclude gains or losses on asset dispositions, costs and profit from PGM recycling, depletion, depreciation and amortization and asset retirement costs and changes in product inventories. The Company uses this measure as a comparative indication of the cash costs related to production and processing in any period. As noted above, because this measure does not take into account the inventory timing differences that are included in costs of revenues, it cannot be used to develop meaningful measures of earnings or profitability.

When divided by the total tons milled in the respective period, Total Cash Cost per Ton Milled (Non-GAAP) – measured for each mine or consolidated– provides an indication of the level of cash costs incurred per ton milled in that period. Because of variability of ore grade in the Company’s mining operations, production efficiency underground is frequently measured against ore tons produced rather than contained PGM ounces. And because ore tons are first weighed as they are fed into the mill, mill feed is the first point at which production tons are measured precisely. Consequently, Total Cash Cost per Ton Milled (Non-GAAP) is a general measure of production efficiency, and is affected both by the level of Total Cash Costs (Non-GAAP) and by the volume of tons produced and fed to the mill.

When divided by the total recoverable PGM ounces from production in the respective period, Total Cash Cost per Ounce (Non-GAAP) – measured for each mine or consolidated– provides an indication of the level of cash costs incurred per PGM ounce produced in that period. Recoverable PGM ounces from production are an indication of the amount of PGM product extracted through mining in any period. Because ultimately extracting PGM material is the objective of mining, the cost per ounce of extracting and processing PGM ounces in a period is a useful measure for comparing extraction efficiency between periods and between the Company’s mines. Consequently, Total Cash Cost per Ounce (Non-GAAP) in any period is a general measure of extraction efficiency, and is affected by the level of Total Cash Costs (Non-GAAP), by the grade of the ore produced and by the volume of ore produced in the period.

Total Operating Costs (Non-GAAP): This non-GAAP measure is derived from Total Cash Costs (Non-GAAP) for each mine or consolidated by excluding royalty, tax and insurance expenses from Total Cash Costs (Non-GAAP). Royalties, taxes and insurance costs are contractual or governmental obligations outside of the control of the Company’s mining operations, and in the case of royalties and most taxes, are driven more by the level of sales realizations rather than by operating efficiency. Consequently, Total Operating Costs (Non-GAAP) is a useful indicator of the level of production and processing costs incurred in a period that are under the control of mining operations. As noted above, because this measure does not take into account the inventory timing differences that are included in costs of revenues, it cannot be used to develop meaningful measures of earnings or profitability.

When divided by the total tons milled in the respective period, Total Operating Cost per Ton Milled (Non-GAAP) – measured for each mine or consolidated– provides an indication of the level of controllable cash costs incurred per ton milled in that period. Because of variability of ore grade in the Company’s mining operations, production efficiency underground is frequently measured against ore tons produced rather than contained PGM ounces. And because ore tons are first actually weighed as they are fed into the mill, mill feed is the first point at which production tons are measured precisely. Consequently, Total Operating Cost per Ton Milled (Non-GAAP) is a general measure of production efficiency, and is affected both by the level of Total Operating Costs (Non-GAAP) and by the volume of tons produced and fed to the mill.

When divided by the total recoverable PGM ounces from production in the respective period, Total Operating Cost per Ounce (Non-GAAP) – measured for each mine or consolidated– provides an indication of the level of controllable

55 cash costs incurred per PGM ounce produced in that period. Recoverable PGM ounces from production are an indication of the amount of PGM product extracted through mining in any period. Because ultimately extracting PGM material is the objective of mining, the cost per ounce of extracting and processing PGM ounces in a period is a useful measure for comparing extraction efficiency between periods and between the Company’s mines. Consequently, Total Operating Cost per Ounce (Non-GAAP) in any period is a general measure of extraction efficiency, and is affected by the level of Total Operating Costs (Non-GAAP), by the grade of the ore produced and by the volume of ore produced in the period.

(in thousands, except per ounce and per ton data) 2010 2009 2008 2007 2006 Consolidated: Total operating costs (Non-GAAP) $ 160,738 $ 164,142 $ 167,660 $ 143,988 $ 143,561 Total cash costs (Non-GAAP) $ 192,785 $ 190,757 $ 201,915 $ 177,384 $ 176,462 Total production costs (Non-GAAP) $ 264,809 $ 262,364 $ 284,130 $ 261,778 $ 259,036 Divided by total ounces 485 530 499 537 601 Divided by total tons milled 1,181 1,184 1,206 1,244 1,351

Total operating cost per ounce (Non-GAAP) $ 331 $ 310 $ 336 $ 268 $ 239 Total cash cost per ounce (Non-GAAP) $ 397 $ 360 $ 405 $ 330 $ 294 Total production cost per ounce (Non-GAAP) $ 546 $ 495 $ 569 $ 487 $ 431

Total operating cost per ton milled (Non-GAAP) $ 136 $ 139 $ 139 $ 116 $ 106 Total cash cost per ton milled (Non-GAAP) $ 163 $ 161 $ 167 $ 143 $ 131 Total production cost per ton milled (Non-GAAP) $ 224 $ 222 $ 236 $ 210 $ 192

Reconciliation to consolidated costs of revenues: Total operating costs (Non-GAAP) $ 160,738 $ 164,142 $ 167,660 $ 143,988 $ 143,561 Royalties, taxes and other 32,047 26,615 34,255 33,396 32,901 Total cash costs (Non-GAAP) $ 192,785 $ 190,757 $ 201,915 $ 177,384 $ 176,462 Asset retirement costs 538 606 885 734 650 Depreciation and amortization 71,121 70,239 82,792 82,396 83,583 Depreciation and amortization (in inventory) 365 762 (1,462) 1,264 (1,659) Total production costs (Non-GAAP) $ 264,809 $ 262,364 $ 284,130 $ 261,778 $ 259,036 Change in product inventories 2,627 (6,797) 32,916 11,848 41,642 Cost of PGM recycling 157,310 75,920 448,351 308,567 249,689 PGM recycling - depreciation 472 178 192 142 100 Add: Profit from PGM recycling 12,070 5,908 32,671 26,180 25,972 Total consolidated costs of revenues (2) $ 437,288 $ 337,573 $ 798,260 $ 608,515 $ 576,439 Stillwater Mine : Total operating costs (Non-GAAP) $ 111,659 $ 116,913 $ 110,931 $ 83,758 $ 92,827 Total cash costs (Non-GAAP) $ 133,790 $ 135,353 $ 133,571 $ 105,391 $ 114,323 Total production costs (Non-GAAP) $ 184,226 $ 184,614 $ 181,812 $ 152,679 $ 163,420 Divided by total ounces 352 394 349 359 409 Divided by total tons milled 781 777 768 715 801

Total operating cost per ounce (Non-GAAP) $ 317 $ 297 $ 318 $ 233 $ 227 Total cash cost per ounce (Non-GAAP) $ 380 $ 344 $ 383 $ 294 $ 280 Total production cost per ounce (Non-GAAP) $ 524 $ 469 $ 521 $ 425 $ 400

Total operating cost per ton milled (Non-GAAP) $ 143 $ 150 $ 144 $ 117 $ 116 Total cash cost per ton milled (Non-GAAP) $ 171 $ 174 $ 174 $ 147 $ 143 Total production cost per ton milled (Non-GAAP) $ 236 $ 238 $ 237 $ 214 $ 204

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(in thousands, per ounce and per ton data) 2010 2009 2008 2007 2006 Stillwater Mine continued: Reconciliation to costs of revenues: Total operating costs (Non-GAAP) $ 111,659 $ 116,913 $ 110,931 $ 83,758 $ 92,827 Royalties, taxes and other 22,131 18,440 22,640 21,633 21,496 Total cash costs (Non-GAAP ) $ 133,790 $ 135,353 $ 133,571 $ 105,391 $ 114,323 Asset retirement costs 498 507 645 512 470 Depreciation and amortization 49,309 47,527 47,748 46,521 49,620 Depreciation and amortization (in inventory) 629 1,227 (152) 255 (993) Total production costs (Non-GAAP ) $ 184,226 $ 184,614 $ 181,812 $ 152,679 $ 163,420 Change in product inventories (2,887) (7,393) 7,524 (2,872) 1,882 Add: Profit from PGM recycling 8,733 4,395 21,889 17,299 18,015 Total costs of revenues (2) $ 190,072 $ 181,616 $ 211,225 $ 167,106 $ 183,317

East Boulder Mine: Total operating costs (Non-GAAP) $ 49,079 $ 47,229 $ 56,729 $ 60,230 $ 50,734 Total cash costs (Non-GAAP ) $ 58,995 $ 55,404 $ 68,344 $ 71,993 $ 62,139 Total production costs (Non-GAAP ) $ 80,583 $ 77,750 $ 102,318 $ 109,099 $ 95,616 Divided by total ounces 133 136 150 178 192 Divided by total tons milled 400 407 438 529 550

Total operating cost per ounce (Non-GAAP) $ 368 $ 347 $ 378 $ 338 $ 264 Total cash cost per ounce (Non-GAAP ) $ 442 $ 407 $ 456 $ 404 $ 324 Total production cost per ounce (Non-GAAP ) $ 604 $ 572 $ 682 $ 613 $ 498

Total operating cost per ton milled (Non-GAAP ) $ 123 $ 116 $ 130 $ 114 $ 92 Total cash cost per ton milled (Non-GAAP) $ 147 $ 136 $ 156 $ 136 $ 113 Total production cost per ton milled (Non-GAAP) $ 201 $ 191 $ 234 $ 206 $ 174

Reconciliation to costs of revenues: Total operating costs (Non-GAAP) $ 49,079 $ 47,229 $ 56,729 $ 60,230 $ 50,734 Royalties, taxes and other 9,916 8,175 11,615 11,763 11,405 Total cash costs (Non-GAAP ) $ 58,995 $ 55,404 $ 68,344 $ 71,993 $ 62,139 Asset retirement costs 40 99 240 222 180 Depreciation and amortization 21,812 22,712 35,044 35,877 33,963 Depreciation and amortization (in inventory) (264) (465) (1,310) 1,007 (666) Total production costs (Non-GAAP ) $ 80,583 $ 77,750 $ 102,318 $ 109,099 $ 95,616 Change in product inventories (865) (5,145) 5,500 432 (439) Add: Profit from PGM recycling 3,337 1,513 10,782 8,881 7,957 Total costs of revenues (2) $ 83,055 $ 74,118 $ 118,600 $ 118,412 $ 103,134

PGM recycling and Other: (1) Reconciliation to costs of revenues: Cost of open market purchases and palladium received in Norilsk Nickel $ 6,379 $ 5,741 $ 19,892 $ 14,288 $ 40,199 transaction PGM recycling - depreciation 472 178 192 142 100 Cost of PGM recycling 157,310 75,920 448,351 308,567 249,689 Total costs of revenues $ 164,161 $ 81,839 $ 468,435 $ 322,997 $ 289,988

(1) PGM recycling and Other (2006) include PGM recycling, sales of palladium received in the Norilsk Nickel transaction and metal purchased on the open market for re-sale.

(2) Revenue from the sale of mined by-products is credited against gross production costs for Non-GAAP presentation. Revenue from the sale of mined by-products is reported on the Company’s financial statements as mined revenue and is included in consolidated costs of revenues. Total costs of revenues in the above table have been reduced by approximately $28.0 million, $23.6 million, $36.8 million, $53.8 million and $42.6 million in the years 2010, 2009, 2008, 2007 and 2006, respectively.

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ITEM 7

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Company’s Consolidated Financial Statements and Notes, included elsewhere in this report, and the information contained in Part II, Item 6 “Selected Financial Data.”

Overview of Transformational Year

Stillwater Mining Company (the “Company”) is a Delaware corporation, headquartered in Billings, Montana and listed on the New York Stock Exchange under the symbol SWC. The Company mines, processes, refines and markets palladium and platinum ores from two underground mines situated within the J-M Reef, an extensive trend of PGM mineralization located in Stillwater and Sweet Grass Counties in south central Montana. Ore produced from each of the mines is crushed and concentrated in mills located at each mine site. The resulting concentrates are then trucked to the Company’s smelting and refining complex in Columbus, Montana which processes the mine concentrates along with recycled spent catalyst materials received from third parties. A portion of the recycling material is purchased for the Company’s own account and the balance is toll processed for a fee on behalf of others. The finished product of the Company’s base metal refinery is a PGM-rich filter cake which is shipped to third parties for final refining into finished metal.

The Company regards 2010 as a transformational year for several reasons:

1. Increased Metal Prices. Commodity markets in general received worldwide attention throughout 2010. In the case of palladium, the price increased from $407 per ounce at the beginning of 2010 to $797 per ounce at year end, a 96% increase. Among the factors contributing to this increase were the robust economy in China, the gradual return of the automotive sector after its steep decline in 2008 and 2009, growing acceptance worldwide of palladium as a jewelry metal, the introduction of palladium and platinum exchange-traded funds into the U.S. market in early 2010, and speculation that the Russian government has nearly depleted its Soviet-era stockpile of palladium, all of which accounted for strong demand and a limited worldwide supply of the metal.

2. Diversification. In November 2010, the Company acquired the PGM assets of Marathon PGM Corporation, a Canadian exploration company. The transaction was valued at US$173.4 million (which included $36.0 million of deferred income tax liability assumed) utilizing a combination of cash and newly issued shares of the Company’s common stock. The principal property acquired is a large PGM and copper deposit located near the town of Marathon, Ontario, Canada. While the Marathon deposit is currently in the permitting stage and will not be in production for several years, the acquisition represents a significant decision to diversify beyond the Company’s operations in the J-M Reef. The Marathon acquisition follows several years of evaluating possible acquisitions in an effort to reduce the Company’s exposure to a single mining property. The Company expects to devote significant cost and attention to the development of the Marathon property and will continue to review other diversification opportunities in the future.

3. Sale by Majority Owner. In December 2010, MMC Norilsk Nickel, the Company’s majority shareholder, announced that it had completed an underwritten secondary offering of all its holdings of Stillwater common stock, thereby eliminating its entire voting interest in the Company. Norilsk Nickel’s two non-independent nominees on the Board of Directors subsequently resigned and the 2003 Shareholders Agreement between the Company and Norilsk Nickel terminated. Norilsk Nickel’s investment in the Company provided valuable liquidity and signaled a commitment to the palladium market when they entered into it in June of 2003. With Norilsk Nickel’s exit at the end of 2010, the Company believes that it is now well-positioned to move forward as an independent entity. The sale by Norilsk Nickel had the effect of virtually doubling the public float of the Company’s common stock, without diluting any existing shareholders.

4. Strong Recycling Business. Revenues from the Company’s PGM recycling business more than doubled in 2010 and the Company expects to continue to grow and expand this business. The recycling business is highly complementary to the Company’s basic mining business and has shown that it can be nicely profitable. The Company in recent years has updated its recycling business model, strengthening its controls over this business and reducing its exposure to credit and pricing risk.

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Principal Factors Affecting Stillwater Mining Company:

The surface expression of the J-M Reef which the Company controls is about 28 miles long and was originally part of a much larger reef structure located several miles deep in the earth. When the Beartooth Mountains were formed as part of the Rocky Mountain uplift about 65 million years ago, this portion of the reef was broken off from the larger structure as it was uplifted in the mountain. The resource the Company is now mining is about a mile in vertical extent, generally about five feet thick, and is typically found tilted up at an angle of about 55% - although this angle varies considerably depending on location.

PGM ore grades in the J-M Reef are some of the highest in the world with comparatively low mining cost per ounce, but they are palladium rich and, because of the uplifted configuration of the reef, complex to mine. The mines compete primarily with the platinum rich PGM ore reserves within South Africa’s Bushveld Complex, which are less steeply dipping but today tend to be deep underground which generally results in comparatively higher mining costs per ounce, and with the nickel mines in the Russian Federation which produce palladium rich PGMs as a major by-product and so at a very low marginal cost. Consequently, the Company’s financial performance relative to its peers depends not only on the level of PGM prices, but also on the differential between the price of platinum and the price of palladium. In periods of low PGM prices, and in particular when palladium prices also are low relative to platinum prices, the Company’s palladium-rich production may put it at a disadvantage to comparable mines in South Africa. See “Business, Risk Factors and Properties – Risk Factors – The Company May Be Competitively Disadvantaged As A Primary PGM Producer With A Preponderance Of Palladium” for further discussion.

The first of the Company’s two Montana mining operations, the Stillwater Mine, is situated near the town of Nye toward the eastern end of the J-M Reef. The mine’s primary portals are located at 5,000 feet above sea level, with access through horizontal adits on both sides of the Stillwater Valley and via a shaft and hoist from the 5,000 foot level down to about the 3,200 foot elevation. Stillwater Mine first opened in 1986 and currently has developed portions of the reef along about six horizontal miles underground on various levels ranging from about 2,000 feet at the deepest up to 7,500 feet above sea level. Typically, the lower portion of the Stillwater Mine accessed from the shaft – appropriately known as the “off-shaft” area – has contained relatively high ore grades, but the ore in this area is found in pods and tends to be inconsistent with respect to continuity, grade and thickness along the reef. By contrast, the western portion of the mine above the 5,000 level – the “upper west” area – generally has somewhat lower ore grades but the ore in this area is relatively consistent as to continuity, grade and thickness along the reef. Overall ounce production at the Stillwater Mine, then, is sensitive not only to the ore tons produced from each of these areas, but also, in view of the grade difference, to the relative proportion of total ore produced from each area. In 2010, the mine produced 351,700 ounces of palladium and platinum – off from 393,800 ounces in 2009 – and generated sales revenues of $261.3 million. At December 31, 2010, the mine had 850 employees, including 306 miners.

The Company’s other Montana mine, the East Boulder Mine, is located southeast of Big Timber and McLeod in the Gallatin National Forest, on the western portion of the J-M Reef. It is accessed by two parallel 18,000-foot horizontal rail adits that intersect the reef perpendicularly at the 6,500 foot elevation deep within the mountain. The mine first opened in 2002, and has developed along about 2.5 horizontal miles of the J-M Reef underground, with operations on different levels ranging from about 6,500 to 7,900 feet above sea level. During 2010, East Boulder Mine produced 133,400 ounces of palladium and platinum – compared to 136,100 ounces in 2009 – with sales revenue of $91.8 million. At the end of 2010, the mine had 280 employees, including 101 miners.

The Company recycles spent catalyst materials through its processing facilities in Columbus, Montana, recovering palladium, platinum and rhodium from these materials. The recycling segment has proven to be a profitable ancillary business. However, the recycling business has also proven to be very sensitive to PGM prices, and volumes of recycling material available in the market have dropped very sharply when PGM prices have declined, as has the profitability of the business.

The Company believes it enjoys certain competitive advantages in the recycling business. The smelting and refining complex in Columbus Montana already processes mined PGM concentrates, which contain not only PGMs, but also significant quantities of nickel and copper as by-products. Copper and nickel bind with the PGMs from recycling in the smelter and so aid in collecting the PGMs. Consequently, the Company is able to recycle catalyst material within its system at an incremental cost lower than other processors. Moreover, the Company also believes the physical location of its processing facilities provides a logistical advantage over smelters in Europe and South Africa. And as described below, the Company is incorporating certain technological innovations that may contribute further benefit.

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Since the Company’s recycling activities are substantially dependent on the availability in the smelter of the copper and nickel contained in the mine concentrates, should it become necessary at some point to reduce or suspend operations at the mines, the proportion of operating costs allocated to the recycling segment could increase, making the recycling segment less competitive. Further, in order to operate the smelter and refinery without significant volumes of mine concentrates, modifications to the processing facilities would probably be required. There is no assurance that the recycling facilities can operate profitably in the absence of significant concentrates from the mines, or that capital would be available under those circumstances to complete any necessary modifications to the processing facilities.

The Company has taken steps over the past year or so to reposition itself in the recycling business. In May 2009, the Company commissioned a new electric furnace in the Columbus smelter, increasing throughput capacity and creating backup furnace capacity in the event of planned or unforeseen outages. During the third quarter 2010, the Company commissioned a dedicated catalyst processing and sampling plant that allows for the segregation and handling of multiple batches of recycling material simultaneously. In early 2011, the Company will commission a state-of-the-art assay laboratory constructed and equipped in 2010 which utilizes an automated x-ray facility that will provide accurate results with faster turnaround times than conventional fire assay methods. New laboratory software will support this automated x-ray system, as well as, other laboratory processes.

In acquiring recycled automotive catalysts, the Company advances funds to its suppliers ahead of actually receiving material in order to facilitate procurement efforts. In past years these working capital advances often were very substantial and represented significant financial exposure for the Company. However, following the steep drop in PGM prices during the second half of 2008, which resulted in large inventory losses for many of the Company’s suppliers and led to the Company writing off $26 million of such advances as uncollectible, the Company revisited its recycling business model. In general, the Company now only advances funds to suppliers when the associated material for recycling is awaiting transit or is already in transit to the Columbus processing facilities. The new recycling sampling and assay facilities will allow the Company to accelerate final settlements with suppliers, thereby reducing the amount of working capital they require and partially offsetting the competitive disadvantage of curtailing advances. Outstanding procurement advances that were not backed up by inventory physically in the Company’s possession at December 31, 2010 and 2009, totaled $6.1 million and $3.6 million, respectively.

Following the collapse in most metal prices during the second half of 2008, platinum and palladium market prices generally trended up during most of 2009 and 2010, with both metals closing on or near their highs in London of $1,786 and $797 per ounce, respectively, at the end of 2010. In New York, the palladium price closed at $800 per ounce. PGM prices have been closely correlated with the ratio of the U.S. dollar to the euro in recent years, and they declined somewhat during May and June of 2010 in response to European economic uncertainty and associated strengthening of the U.S. dollar. Prices then recovered as the European monetary crisis subsided and the dollar weakened in anticipation of further “quantitative easing.”

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An additional factor supporting PGM prices in 2010 was the introduction of PGM exchange-traded funds (ETFs) into the U.S. in January of 2010. The ETFs have proven to be a popular investment vehicle, and it was estimated that by the end of 2010, ETFs worldwide held about two million ounces of palladium and a million ounces of platinum. The Company expects that if the world economic recovery continues on track, there will likely be continued strong demand from Asia for raw materials, including PGMs, and specifically accelerated growth in automotive demand around the world. On the supply side, it appears there has been a significant reduction in palladium exports from the Russian government’s stockpiles over the past year and a half, and various commentators inside and outside of Russia have suggested recently that those stockpiles are approaching exhaustion. The diminution of those exports, coupled with very limited ability to ramp up production at existing PGM operations, suggests that markets for these metals may continue to be fairly tight for the foreseeable future.

However, this market view also encompasses certain risks. PGM trading volumes are relatively thin and their markets have limited liquidity, particularly in comparison to markets for other precious metals and the major industrial metals. Consequently, PGM prices historically have been volatile and difficult to forecast. PGM prices may be affected – favorably or unfavorably – by numerous factors, including the level of industrial demand, particularly from the automotive sector; supply factors that include changes in mine production and inventory activity; and by shifts in investor sentiment. In particular, although exports from the Russian government inventories appear to have slowed, the Russian Federation does not officially disclose its inventory holdings and there is no assurance that those inventories are actually approaching depletion. Recent PGM prices are comparatively high by historical standards, and to some extent these price levels are likely driven by investor sentiment that could shift away from precious metals if other markets become more attractive. The Company attempts to manage this market volatility in several ways, including by entering into long-term supply agreements, in some cases through metal hedging, by investing in the developed state of the mines, giving attention to cost controls and by monitoring the Company’s liquidity closely to provide capacity to bridge periods when PGM prices are low.

Automotive demand generally continued to strengthen worldwide during 2010 after its steep decline during late 2008 and 2009. Light vehicle sales in North America are estimated at 13.9 million units during 2010, up 10.3% from 12.6 million units in 2009. Chinese light vehicle sales in 2010 are estimated at 17.2 million units, up from about 12.9 million units in 2009.

Worldwide mine production of palladium and platinum, which had declined in every year since peaking in 2006, appears to have strengthened slightly during 2010. North American Palladium’s Lac des Iles Mine in Canada, which was shut down due to the economic recession and weak metal prices for about 18 months, reopened during the 2010 second quarter and is currently reported to be producing palladium and platinum at an annual rate of between 150,000 and 200,000 ounces. Norilsk Nickel, which produces about 50% of the world’s annual palladium output as a by-product of its nickel operations, had indicated that its 2010 production was likely to be equal to or slightly ahead of its 2009 production. And the South African producers collectively, while projecting slight production increases each year, consistently have encountered operational or other issues that have limited their output growth. Overall, the Company’s assessment is that PGM supplies remain constrained, with little opportunity for significant growth in worldwide output over the next few years. This is true despite the current strong market prices for PGMs that normally would incentivize production growth.

Of some concern in the PGM industry is the lack of an adequate level of reinvestment in the business in recent years. While a few smaller companies, principally in South Africa, have invested in developing new mines, the amount of new production they are generating is not sufficient over the longer term to sustain current production levels. Putting in a large new underground mine on the Bushveld in South Africa requires an investment of a billion dollars or so in a new shaft and takes four or five years to develop. Although current PGM prices seem comparatively robust in U.S. dollars, an adverse exchange rate for the South African rand has limited the benefit of higher metal prices to South African producers. As a result, they do not see price levels that can justify the kinds of new mining investments that need to be made. When coupled with other challenges in South Africa, including power shortages, rapidly escalating wage structures, political uncertainty on several fronts, and declining availability of experienced professionals, the outlook for adequate future reinvestment there seems fairly bleak.

In response to the steep deterioration in PGM prices during the second half of 2008, the Company restructured its operations, focusing its business plans for 2009 and 2010 on conserving cash and maintaining the Company’s financial viability. As a result, the Company transferred miners and laid off about 23% of its total employee workforce, terminated most contractors, adjusted the Company’s mining processes, relocated the Company’s corporate offices, and severely restricted operating and capital expenditures. In total, the Company reduced its employee workforce by 320 between September 2008 and March 2009 and by another 63 positions during the remainder of 2009. By March of 2009, the miner

61 workforce at the East Boulder Mine had been reduced to 111 from 170, while transfers to the Stillwater Mine had increased the number of miners there to 312 from 241. At the same time, the Company eliminated 45 contractor positions, mostly at the Stillwater Mine. The Company also sharply reduced support staffing at all locations. Several corporate programs, including market development, recruiting, exploration and investor relations, were eliminated or sharply curtailed in 2009 and remained restricted during 2010. Capital spending, which had totaled about $82.3 million in 2008, was reduced to $39.5 million in 2009 and $50.3 million in 2010 in an effort to conserve cash.

As the fundamentals of the PGM markets strengthened during 2010, the Company assembled a special planning team to review and prioritize additional PGM development opportunities within the Company’s holdings along the J-M Reef. These opportunities were grouped into nine different potential projects, each of which was evaluated based on several criteria, including grade potential, likely capital and operating costs, time and complexity to implement, and ease of access. Two of these opportunities emerged as clear favorites – the Blitz and Graham Creek projects. Both projects are expected to begin in 2011.

The Blitz project envisions developing two 20,000-foot parallel drifts in the footwall on the 5,000 and 5,200 levels eastward from the existing infrastructure in the Stillwater Mine and ultimately driving a ventilation shaft to surface from the end of these drifts. Definition drilling from these drifts could provide a wealth of information about the J-M Reef and perhaps identify attractive future areas for mining. Depending on the project outcome, Blitz production could either serve to extend the ultimate life of the Stillwater Mine or to increase the production rate from the mine. The Blitz development is projected to take about five years to complete at a total cost of about $68.0 million.

The Graham Creek project is similar, but would develop westward in the footwall from the existing infrastructure at the East Boulder Mine, utilizing an existing tunnel boring machine to extend out about 8,200 feet from the current western extremity of the mine. Again, the plan would include adding a new ventilation raise to surface at the end of the drift. This project also is projected to take about five years to complete, but its total cost is estimated at only about $8 million. The lower cost relative to the Blitz project is attributable to the shorter length of the drift, initially developing only a single drift compared to two in the Blitz development, and the lower cost of developing with an in-place tunnel boring machine. The benefits of the Graham Creek project are analogous to those at the Blitz, including potential to extend mine life or possibly to increase production rates, and the opportunity to expand the Company’s knowledge of an undeveloped section of the J-M Reef.

The recovery of the PGM markets during 2009 and 2010 also allowed the Company to proceed with an attractive Canadian acquisition, the PGM assets of Marathon PGM Corporation in late 2010. The principal asset acquired is a PGM development project near the town of Marathon, Ontario on the north shore of Lake Superior. The project will require several years to complete permitting and mine construction, but the Company believes it could be in production by 2014 or 2015. The project feasibility study indicates potential annual production from the completed mine of about 200,000 ounces of PGMs and 37 million pounds of copper. At recent metal prices, the Marathon development could contribute substantially to the Company’s future financial performance.

In light of the Environmental Protection Agency’s recent determination to regulate carbon dioxide (CO2) emissions as hazardous to health, the Company has assessed its exposure to likely restrictions on such emissions. The Company’s principal sources of CO2 emissions are limited to a comparatively few internal combustion engines in vehicles and mining equipment, and to stationary sources such as process heaters, dryers and converters that consume natural gas. The Company already utilizes buses to transport its workforce to and from the mines and utilizes a 70% blend of biodiesel fuels in its operations which reduces workplace diesel particulate matter emissions and its carbon footprint. Consequently, any taxes or added restrictions on emissions are unlikely to have any direct material effect on the Company’s operations. The Company’s physical exposure to climate change is minimal. The Company’s operations are not materially dependent upon weather patterns or seasonal availability of water. The relatively remote location of the mines presents some exposure to severe weather, particularly winter snowfall that can restrict access to the mine sites, but the Company already regularly addresses this issue during the winter months in Montana. Similarly, summer wildfires can temporarily restrict access to the mines, but their duration tends to be relatively short. Probably the Company’s most significant exposure to greenhouse gas regulation is the potential consequence of a substantial longer-term movement away from internal combustion engines on the demand for PGMs in catalytic converters. Such a major shift in automotive demand could depress PGM prices and impair the Company’s financial performance. Regulatory constraints on other industries also could affect the price or availability of electricity and other materials, driving up the Company’s operating costs.

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2010 Results and Commentary

For the full year 2010, the Company reported net income of $50.4 million, or $0.51 per fully diluted share, a substantial improvement over the loss of $8.7 million, or $0.09 per diluted share, reported for 2009 and the loss of $115.8 million, or $1.24 per diluted share in 2008. The 2008 results included a property, plant and equipment impairment charge of $67.3 million and a loss on advances on inventory purchases of $26.0 million. Steadily strengthening realized prices over the course of 2010 for the Company’s primary products, palladium and platinum, more than offset the effect of lower ounce production relative to 2009. The Company’s average realized price on sales of mined palladium and platinum was $721 per ounce in 2010, substantially higher than the $549 per ounce average realized in 2009. Had these same sales taken place at market prices, the Company’s 2010 average would have been $773 per ounce and the 2009 average $487 per ounce. The Company’s combined average realized price for each metal differed from equivalent average market prices as the result of various contractual provisions, which included ceiling prices that applied to a portion of the Company’s mined platinum, floor prices that during most of 2009 benefited the Company’s mined palladium, small contractual discounts on those volumes not subject to floors or ceilings, and selling prices based on monthly averages which generally have lagged the market price by one month.

The Company’s mine production of palladium and platinum totaled 485,100 ounces in 2010, down 8.5% compared to 529,900 ounces in 2009. The lower mine production in 2010 was primarily attributable to operational and grade issues in the off-shaft area of the Stillwater Mine. Revenues from mining in 2010 totaled $353.1 million, up from $283.2 million in 2009, on stronger realized prices in 2010 for the Company’s primary products, palladium and platinum.

Stillwater Mine’s total cash costs averaged $380 per ounce for the full year 2010, higher than originally planned and above the $344 per ounce actually realized in 2009. Interestingly, looking at tons mined instead of ounces produced, the average cash cost per ore ton mined in 2010 at Stillwater Mine was $171, less than the $174 per ton reported in 2009. This result suggests that the higher cost per ounce in 2010 was mostly driven by the lower ore grade at Stillwater, rather than by rising costs or lower mining productivity. A higher than usual proportion of mining stopes in the off-shaft area of the mine are currently either early or late in their production life and are somewhat smaller than has been typical in the past – both factors that might tend to result in more volatility in realized ore grades. Also, a higher proportion of Stillwater Mine production came out of the upper west area of the mine in 2010 than was originally planned, and ore grades in the upper west tend to be lower than in the off-shaft area.

Capital expenditures at the Stillwater Mine totaled $34.1 million in 2010, exceeding plan and well ahead of the $26.7 million spent during 2009. Primary development at the Stillwater Mine advanced about 19,700 feet during 2010, about 13% ahead of plan, but to some extent this was at the expense of secondary development, which at about 14,500 feet was 18% behind plan. Diamond drilling footages in 2010 at the Stillwater Mine totaled about 291,000 feet, about 8% better than planned.

Total cash costs per ounce at the East Boulder Mine in 2010 averaged $442 per ounce, a little higher than plan and substantially higher than the $407 per ounce averaged in 2009. In East Boulder’s case, total cash costs per ore ton mined averaged $147, exactly on plan but higher than the $136 reported in 2009. The year-on-year difference is mostly attributable to the quality of areas available to mine, an issue recognized and reflected in the original 2010 mine plan at East Boulder. Capital expenditures at the mine totaled $6.5 million in 2010 compared to $4.4 million in 2009. Actual primary development at the East Boulder Mine advanced about 3,500 feet during 2010, lagging the plan, while secondary development advanced 12,500 feet in 2010, slightly above plan. In total, development footage at the East Boulder Mine was about 3.5% behind plan, reflecting delays in getting a new development crew in place and operating. Diamond drilling footage totaled about 81,500 feet at East Boulder in 2010, about 17% behind plan, in part driven by the lower primary development.

The Company’s sales agreement with Ford Motor Company, which committed 80% of the Company’s palladium production and 70% of its platinum production from mining, expired at the end of 2010. This agreement contained certain guaranteed floor and ceiling prices for metal delivered, as well as a small discount to market. The Company believes it could readily sell all of its mine production on a spot basis into terminal markets with virtually no detrimental effect on market prices. Nevertheless, the Company has recently signed a new three-year palladium supply agreement with General Motors Corporation, a one-year palladium agreement with BASF, a one-year platinum supply agreement with Tiffany and is engaged in discussions with other potential customers for the remainder of its mined palladium and platinum. The Company expects ultimately to enter into new supply agreements for most of its metal production, but likely without the pricing floors and caps as in past contracts. The absence of floor prices in any successor contracts will

63 increase the Company’s financial exposure to low PGM prices, while the absence of the ceiling prices in any successor contracts will increase the Company’s opportunity to realize fully on higher prices.

The Company’s smelter and base metal refinery in Columbus, Montana process the PGM ore concentrates from the two mines and also recycles spent PGM catalysts from automotive catalytic converters and from other industrial applications, ultimately recovering palladium, platinum and rhodium from these materials. During 2010, the Company fed about 399,400 combined ounces of recycled platinum, palladium and rhodium into the smelter, of which roughly half was from material purchased by the Company and the remainder was toll processed on behalf of others for a fee. Total ounces fed were up 59% compared to the 251,000 recycling ounces fed in 2009, a year when the auto market was severely depressed and so fewer vehicles were scrapped. Recycling revenues in 2010 were $168.6 million on 156,100 combined ounces sold, benefitting from both higher volumes and stronger PGM prices; 2009 recycling revenues totaled $81.8 million on sales of 102,000 combined ounces.

In 2010, the Company earned $11.5 million from recycling operations on revenues of $168.6 million, reflecting a combined average realization (including rhodium) of $1,046 per sold ounce. By comparison, in 2009 the Company earned $5.9 million from recycling operations on revenues of $81.8 million, with a combined average realization of $779 per sold ounce. Total tons of recycling material processed during 2010, including tolled material, averaged 16.2 tons per day, up from 10.0 tons per day in 2009. Strengthening PGM prices in 2010 have created a greater incentive for suppliers to collect recycling material, and during 2010, the Company was able to enter into new sourcing arrangements for catalyst material with several suppliers.

The Company’s total available liquidity, expressed as cash plus short-term investments, ended 2010 at $208.4 million, comprised of $19.4 million of cash and cash equivalents and $189.0 million of available-for-sale investments. In total this represented a small increase over the corresponding year-end 2009 balance of $201.2 million, including $166.7 million of cash and $34.5 million of liquid investments. However, 2010 also included the expenditure of $63.6 million of cash as part of the acquisition of Marathon PGM Corporation, so cash generation in 2010 was stronger than the change in the year-end balance might indicate. In fact, cash generated from operations during 2010 totaled $123.9 million, up from $59.7 million in 2009, driven by the higher PGM prices in 2010.

At the end of 2009, the Company’s workforce totaled 1,273 employees, down from 1,656 in September 2008. As the year 2010 progressed and PGM prices continued to strengthen, the Company concluded to increase its mine development efforts by reactivating the tunnel boring machine at the East Boulder Mine and by resuming mining on the higher-cost east side of the Stillwater Mine. This decision entailed hiring additional development crews to accommodate these efforts. Consequently, by the end of 2010, the Company’s total workforce had been increased to 1,354.

On December 13, 2010, Norimet Ltd., a wholly-owned subsidiary of MMC Norilsk Nickel (Norilsk) and the Company’s majority shareholder, completed a $971 million secondary offering of Stillwater shares in the public market and so disposed of its entire equity interest in the Company. Prior to completion of the offering it was determined that Norimet was unable to locate its original share certificates and the Company, the Company’s transfer agent and affiliates of Norilsk, entered into certain indemnification and ancillary arrangements to protect the Company and its transfer agent from possible claims relating to the issuance of replacement certificates. For additional information about these arrangements, see Note 19 to the Company’s consolidated financial statements for a discussion of potential exposure to losses that the Company could suffer.

The Company’s environmental performance continued its excellent track record during 2010. Environmental compliance is a very high priority in view of the pristine area in which the Company operates. The Company has a record of open communication and cooperative, proactive involvement with its neighbors and with local and regional environmental groups. The Company’s ground-breaking 2000 Good Neighbor Agreement with these groups provides a vehicle for facilitating such communication and addressing issues cooperatively. The Company and its neighbors celebrated the tenth anniversary of the agreement during 2010.

Outlook

The Company’s operating guidance for 2011 currently includes targeted mine production of about 500,000 combined ounces of palladium and platinum at a total consolidated cash cost per ounce of $430, and capital expenditures of about $120 million. (Total cash cost per ounce is a non-GAAP measure of extraction efficiency – please see “Reconciliation of non-GAAP measures to Costs of Revenues” for a discussion of how this measure is derived).

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The plan to produce 500,000 ounces in 2011 takes into account the lower grades realized in the off-shaft area of the Stillwater Mine in 2010 and compensates for the shortfall by assuming that some production resumes from the east side of the mine in 2011. Management’s assessment of mining conditions for 2011 suggest that ore grades at Stillwater are likely to remain a little lower on average than in the past, reflecting the same higher variability in the lower off-shaft area as was experienced during 2010. These lower realized ore grades centered in the lower off-shaft area seem to be mostly the result of having smaller, more variable stopes to mine there than in prior years. In planning for 2011, the Company has taken these lower grades into account and to offset this has planned to resume a limited amount of production on the east side of the mine, which in the past has had higher ore grades but also more difficult mining conditions. The Company’s 2011 mine plan, taking all this into account, calls for mine production from the combined mining operations of 500,000 ounces of palladium and platinum during 2011.

Prominent risks to accomplishing the 2011 mine plans include continuing variability of mined ore grades, the pending expiration of the labor agreement with the United Steel workers at the end of June, the ability to retain or attract skilled miners as the year progresses, and from a cost perspective, greater than planned cost inflation for key materials.

The targeted 2011 combined average total cash cost per ounce of $430 per ounce for the mines compares to the combined average total cash cost per ounce for the year 2010 of $397. The increase in 2011 reflects a rising cost trend during 2010 – fourth quarter 2010 total cash costs were $432 per ounce – plus general inflation for wages and materials, and the effect of higher average sales realizations on royalties and taxes, all partially offset by slightly higher mine production in 2011. Projected capital expenditures for 2011 of $120 million represent an increase of 139% over the $50.3 million spent during 2010. Capital spending in 2009 and 2010 was restricted in order to conserve cash, so the 2011 budget includes operational spending of $90 million to compensate for the shortfall in those prior years, spending at a higher rate to replace 2011 anticipated production, spending to advance the developed state and significant equipment replacement. The 2011 capital budget also includes developmental spending of $21 million for initial modest capital needs on the newly acquired Marathon properties (about $10 million) and the two long-term resource delineation projects along the J-M Reef, Blitz and Graham Creek, announced during 2010.

The Company’s mining permits require that, in conjunction with its mining and processing activities, it must provide adequate financial surety in support of its permit obligations to complete final reclamation and remediation once mining operations cease. As of December 31, 2010, the Company had outstanding approximately $33.3 million of surety bonds and letters of credit in favor of state and federal agencies to guarantee its final reclamation commitments. Regulatory authorities are currently in the midst of updating an EIS, which when finalized will determine whether or not the existing surety amounts are sufficient. In the interim, however, as the economy weakened late in 2008, the Company agreed to increase its surety bonding by an additional $10 million as an interim measure to alleviate concerns aired by the agencies involved and to allow time for the EIS to be completed. Upon completion of the EIS process, probably during 2011, it is likely that the Company will be required to provide additional surety bond coverage.

Marathon PGM Corporation Acquisition

On November 30, 2010, the Company completed its acquisition of Marathon PGM Corporation (Marathon), a Canadian exploration company with a number of attractive PGM-copper assets. Marathon is a Canadian exploration company with promising PGM assets located near the town of Marathon at the north end of Lake Superior in Ontario and another PGM exploration position known as Bird River in Manitoba. Aside from its PGM assets, Marathon also held certain prospective gold properties that were spun out into a separate public company just prior to the acquisition. Stillwater has since exercised its option to acquire a 15% equity interest in the new gold company, thereby maintaining a relationship with this talented exploration team.

The Marathon PGM assets acquired include two potential resource blocks situated on the larger Coldwell Complex, a geologic formation that appears to be rich in copper-PGM opportunity. Of particular interest to the Company is a well- defined resource known as the Marathon project located near the town of Marathon, Ontario, Canada at the northern extremity of Lake Superior. The Marathon deposit boasts a completed definitive feasibility study (Canadian NI 43-101 compliant) that indicates the potential for PGM production of about 200,000 ounces per year (at a ratio of about 4 to 1 palladium to platinum) and annual copper production on the order of 37 million pounds, from an open-pit operation. Cost of constructing the mine is currently estimated to be about $450 million to full completion, subject to a final detailed engineering study. The Company intends to fund the project out of internally generated cash flow, possibly with supplemental external financing. The Company is in the process of establishing a project team to focus on development of the Marathon PGM reserves.

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The feasibility study anticipates an active mine life of approximately 11.5 years for this property, although there is resource potential that is expected to extend the mine life. In conjunction with the acquisition of these properties, certain non-PGM exploration properties held by Marathon were spun out to the previous Marathon shareholders; Stillwater has subsequently exercised an option to acquire a 15% equity interest in Marathon Gold Corporation, a non-PGM entity.

The Marathon project is currently in the permitting stage and if it remains on schedule could reasonably be in production during 2014 or 2015. Capital spending for Marathon during 2011 is estimated at about $10 million.

Along with the Marathon project comes another attractive exploration property on the same Coldwell Complex, known as Geordie Lake. The Geordie Lake property is situated about 8 kilometers to the west of the Marathon property and appears to be on a parallel structure within the larger complex. Subsequent to the Marathon acquisition, the Company announced its intent to acquire properties and exploration rights to additional properties connecting Marathon and Geordie Lake from Benton Resources Corp. which, in essence, will consolidate ownership of the Coldwell Complex. And along with these property acquisitions, the Company also retained a competent exploration team with a full understanding of the geology of the Coldwell Complex to develop the additional resource potential of these properties.

The Marathon transaction fits well into the Company’s long-term strategy of expanding and diversifying its mining activities. The size of this transaction is manageable financially, and the location is politically stable and logistically accessible. The Marathon area is well developed with extensive public infrastructure already established, and there is other active mining in the general vicinity of the project. The new mine is projected to create a significant number of jobs in an area with relatively high unemployment. The Company’s strong focus on environmental stewardship should serve it well in this region.

Strategic Areas of Emphasis

For several years now the Company’s management has focused on three broad areas of strategic emphasis. While specific initiatives in each area have varied as markets have shifted and the Company has progressed, these fundamental strategic directions continue to provide a basic framework for management’s efforts to strengthen performance and build value for shareholders.

1. Be a Safe, Low-Cost Operator

The Company maintains that companies with safe operations also tend to be well managed and efficient in other important areas. The Company measures safety performance using several criteria, including the frequency and severity of medical reportable incidents and lost-time accidents in comparison to the Company’s own historical performance and relative to other mining operations in the industry. Safety is also assessed in terms of the number and severity of citations issued by MSHA inspectors during their regular visits to the mine sites. Both measures – accident frequency and regulatory compliance – are critical elements of the Company’s safety efforts. Various internal programs support these safety efforts, including annual refresher training and other training programs, pre-shift employee inspections of each work area, regular workgroup discussions of current safety issues and incidents, detailed accident investigations to identify core causes, reporting of near misses that had the potential of resulting in injuries, and more rarely so-called “safety stand-downs” to re-emphasize safety principles as necessary. The Company also responds promptly to correct any safety issues, whether identified internally or by MSHA inspectors, and to eliminate unsafe work practices.

Safety performance at the Company’s mining operations falls under the regulatory jurisdiction of MSHA. MSHA performs detailed quarterly inspections at each of the Company’s mine sites and separately investigates any occurrences deemed to pose a significant hazard to employee health and safety. The Company cooperates fully with MSHA in its compliance responsibilities and maintains its own program of safety training and incident tracking in an effort to ensure that no employee is ever put at risk in carrying out his or her job responsibilities and that all unsafe situations are identified and remediated immediately. The Company’s overall safety performance (including contractors on site), measured in terms of reportable incidents per 200,000 hours worked, averaged a rate of 3.65 during 2010, a modest improvement over the 4.14 rate reported for 2009.

Legislation signed into law on July 21, 2010, requires publicly traded mining companies to disclose certain statistics pertaining to their compliance with the Mine Act. Please see “Business, Risk Factors and Properties-Introduction and Current Operations – 2010 Safety Performance” for a table containing this required safety reporting.

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The significance of aiming to be a low-cost operator deserves some elaboration. Ore grades at the Company’s operations are some of the best in the world, and consequently total cash costs per ounce for the Company’s mining operations also rank among the lowest of any primary PGM producer in the industry. However, because the Company’s ore contains about 3.4 times as much palladium as platinum and South African ores typically have about twice as much platinum as palladium, the Company’s average revenues per ounce are lower and therefore operating margins have tended to be historically tighter than for South African producers. Other significant PGM producers, including Norilsk Nickel and the Canadian nickel operations, produce PGMs as by-products, and PGMs at such operations attract almost no allocated cost. Consequently, the Company measures its performance as a low-cost operator in competitive terms, both relative to its own historical cost performance and relative to historical market prices for its products.

The importance of low-cost operations is amplified now that the palladium floor prices in the Company’s long-term supply agreements have all expired. In today’s market, any new supply agreements that the Company may enter into will mostly likely be market-based and are unlikely to include pricing floors and ceilings. Without the floor prices, of course, the Company will not enjoy the downside price protection such floors have provided in the past when palladium prices have cycled downward. Instead, the Company intends to manage through any downward price cycles using several critical operating tactics:

• maintaining sufficient developed state ahead of operations that capital spending could be curtailed during a downturn without any major long-term impact; • ensuring that the Company’s operating costs remain competitive and that discretionary commitments can be scaled back when necessary; • sustaining the Company’s balance sheet liquidity and limiting financial leverage to reduce exposure to downturns.

Although in theory the Company also could hedge its mine production in the financial markets through derivative transactions, the cost of such a strategy would be prohibitively expensive or would require trading away the opportunity for shareholders to benefit fully from an increase in PGM prices. Consequently, the Company has no intention of hedging its mine production at this time. (The Company does hedge its recycling purchases, locking in a margin on each lot, and also hedges certain critical consumables used in its operations – but this has been standard practice for many years.)

And, on the other hand without the ceiling prices of the contracts or financial market hedges, our revenues will not be limited as they might otherwise be in the current rising price environment, a position that is expected to benefit the Company.

As discussed above, the Company estimates that its mine production for 2011 will be about 500,000 ounces, with a corresponding total cash cost per ounce of $430, and capital spending on all projects totaling about $120 million for the year. Projected 2011 total cash cost per ounce is up about 8% over the 2010 average of $397, but because costs trended up during 2010 it is actually lower than the $432 averaged in the 2010 fourth quarter. Production in 2011 is expected to benefit from the resumption of mining on the east side of the Stillwater Mine and could also benefit further if ore grades improve in the lower off-shaft area of the mine. The $120 million capital budget for 2011, which as already noted includes some “catch-up” spending on infrastructure to offset lower spending during 2009 and 2010, also includes $8 million to refurbish the original electric furnace at the smelter and convert it for slag cleaning, about $10 million for the Blitz and Graham Creek projects, and about $10 million for work at Marathon. Expenses for corporate programs are also planned to increase in 2011, as the Company moves forward with funding an exploration effort and increases its palladium marketing expenditures. Much of this spending is discretionary and could be scaled back in the event that PGM markets weakened substantially.

Management is cautiously optimistic that during 2011 a number of the challenges that have limited the Company’s mining flexibility will largely be resolved. The first-phase installation of the Kiruna electric trucks at Stillwater Mine that will provide more efficient ramp haulage from the deeper portions of the off shaft area – a long-term project – is now nearly complete and should open up more mining alternatives in that part of the mine. Development through a largely barren zone on the west end of the lower off-shaft area in the Stillwater Mine also is nearing completion, allowing access for the first time to the Lower West portion of the mine. The Company expects to experience good ore continuity in the Lower West, analogous to the Upper West area above it, and initial findings in the drifts that have driven through have tended to confirm this expectation. The Lower West is likely to be a primary mining area at Stillwater Mine over the next decade.

The intent of the higher spending in 2011 is to strengthen the developed state of the mines and also, particularly in view of stronger PGM prices, to position the mines in time for a modest expansion of production rates going forward.

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The effect of “using up” a portion of the developed state at both mines in 2009 and 2010 means that there are fewer alternatives available for mining if problems develop in a particular area. This ultimately may be reflected in lower ounce production or in reduced mining efficiency, depending on the circumstances. The ability to throttle back development in times of economic difficulty, thereby conserving cash, is a significant benefit of advancing the developed state well ahead of mining when PGM prices are strong. Operationally, it is like having money in the bank. As the economy recovers and strengthens, though, it is important to replace that developed state by increasing investment in mine development.

Although manpower on site remains adequate to staff current operations, the Company will need to add manpower to support the additional development in 2011 and for all of these future operating initiatives. Some staffing increases also will be needed to support the expanded exploration, marketing and development programs. While it may be a challenge to add all of the new miners needed, the Company has resumed recruiting efforts in an effort to meet these increased requirements.

Ore production at the Stillwater Mine averaged 2,138 tons of ore per day during 2010; this compares to an average of 2,129 ore tons per day produced during 2009. The rate of ore production at the East Boulder Mine averaged 1,097 tons per day during 2010; compared to an average of 1,116 ore tons per day during 2009.

During 2010, the Company’s mining operations produced a total of 374,100 ounces of palladium, and 111,000 ounces of platinum. As by-products, the mines also produced and sold 9,200 ounces of gold, 4,900 ounces of silver, 1,600 ounces of rhodium, 824,000 pounds of copper and 1,157,000 pounds of nickel (as nickel sulfate). By comparison, in 2009 the mines produced to 407,000 ounces of palladium and 122,900 ounces of platinum. They also produced and sold as by-products 9,200 ounces of gold, 5,700 ounces of silver, 4,200 ounces of rhodium, 776,000 pounds of copper and 856,000 pounds of nickel. Revenues from by-product sales totaled $28.0 million in 2010 and $23.6 million in 2009.

2. Palladium Market Development

A consortium of South African producers has spent significant sums each year for many decades now marketing platinum. Their efforts have been well rewarded, with platinum positioned as the premier jewelry metal, projecting an image of elegance and high quality. Platinum also is a metal of choice in certain industrial applications where its remarkable catalytic properties are required. Palladium, on the other hand, historically has never enjoyed a comparable level of marketing support and has remained largely an unknown metal to a large swath of consumers. However, in 2004 palladium began to appear as an alternative jewelry metal in China after the price of platinum moved above $800 per ounce in December 2003. Recognizing this as an opportunity, and identifying the marketing gap, the Company stepped forward beginning in 2004, initially putting forward a comparatively modest marketing program that focused on providing technical support to manufacturers and bench jewelers and image advertising at the industry level through the Palladium Alliance International, a entity organized by the Company to facilitate marketing collaborations. This effort continued on a modest scale until the economic downturn of late 2008 and 2009, at which time it was cut back sharply due to economic constraints. However, in late 2010 the Company began to resurrect its marketing program, and in 2011 will broaden its efforts, with particular emphasis on China. It also appears that Norilsk Nickel will launch a major marketing campaign for palladium jewelry in 2011.

Even through the economic downturn, the Company maintained marketing representatives in China who continue to provide first-hand insight into palladium activity there and maintain contact with key palladium consumers. The Company also sponsors palladium image advertising in Chinese media. China first led the recent trend toward using palladium in jewelry and remains the largest market for it. According to Johnson Matthey, consumption of palladium in jewelry declined to just over 600,000 ounces in 2010, down from about a million ounces per year prior to the economic downturn, with most of the consumption drop centered in Asia. Some of this may be attributable to lower prices for platinum jewelry during the downturn, as the demand for platinum jewelry increased sharply when prices fell in 2009. The Company’s marketing efforts in 2011 will refocus on Asian consumers. Palladium jewelry is now available in all major markets worldwide, and in January of 2010 the U.K. mandated the hallmarking of all palladium jewelry, formally recognizing it, along with gold, silver and platinum, as a precious jewelry metal.

Automotive applications for palladium in catalytic converters are well established for gasoline engines, but diesel engine catalytic technologies generally have been based on platinum. In recent years, driven mostly by economics, research efforts in the auto industry have focused on how to substitute less expensive palladium for platinum in these applications. The Company has encouraged this research and closely monitored its progress. Reportedly, it is now possible in the laboratory to replace about 50% of the platinum in a diesel system with palladium on nearly a one-for-one

68 basis, although the average proportion of palladium actually used in production vehicles now is estimated to be closer to 25%. Palladium and platinum also are important players in emerging fuel cell technologies.

Other industrial applications for palladium include refinery catalysts, electronics, hydrogen generation and dentistry. Electronic uses that take advantage of palladium’s unique characteristics include multi-layered ceramic capacitors, high- end television screens, and compact discs. Palladium in thin films has a unique ability to pass hydrogen molecules while blocking other impurities, allowing relatively inexpensive production of high-purity hydrogen for chemical processes and fuel cells. Palladium alloys used in dental fillings wear well and have an expansion coefficient that closely matches that of the teeth themselves, although other materials tend to be substituted for palladium when its price rises.

3. Growth and Diversification

The Company monitors diversification opportunities in various mineral exploration and development projects, as well as potential merger or acquisition candidates and other business ventures. It also seeks appropriate opportunities to diversify its existing mining and processing operations, and evaluates potential avenues for vertical integration. The focus of these diversification efforts is both to establish a broader operating base, reducing the Company’s sole reliance on the Montana properties, and ultimately to build value for the Company’s shareholders.

Recognizing the need to broaden its base, the Company over the past several years has successfully expanded its recycling operations into a distinct business segment that has become a meaningful source of income, reducing the Company’s captive reliance financially on the performance of the mines. The recycling business has utilized surplus capacity within the Company’s smelting and refining facilities to generate an additional income stream, requiring relatively little incremental investment in facilities. As already noted, over the past year or so the Company has invested in some new dedicated recycling facilities that are intended to increase the Company’s capacity to handle recycled material and sharply reduce turnaround times for settlement with suppliers.

The Company holds minority investments in two small exploration companies that target PGMs and other precious metals. In the fourth quarter of 2010, the Company acquired the PGM assets of Marathon PGM Corporation, including both a large development property and various exploration holdings. Since then the Company also has acquired additional properties adjacent to the Marathon project in Ontario. The Company also has formed an exploration group aimed at evaluating opportunities related to the Marathon holdings and perhaps extending further a field, as well.

The Company monitors various later-stage mineral development projects, as well as potential merger and acquisition candidates in an effort to diversify the Company’s financial and operating risk and perhaps add scale. While the Company’s primary focus is on properties with potential for PGM production – particularly in North America, the pool of opportunities meeting those criteria is limited, and ancillary opportunities outside of PGMs that have strategic benefits for the Company and are compatible with its existing mining expertise are not ruled out. Thus gold, silver, copper and nickel opportunities or combinations thereof continue to be studied. Management believes that the acquisition of Marathon PGM Corporation, which has both PGMs and copper as described previously, will provide an excellent entry into a development-stage project that will utilize the Company’s resources effectively and establish a strong presence in an attractive North American PGM district.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2010 COMPARED TO YEAR ENDED DECEMBER 31, 2009

Revenues - The Company’s total revenues, including proceeds from the sale of by-products, totaled $555.9 million in 2010, an increase of 40.9% compared to revenues of $394.4 million in 2009. This substantial year-on-year increase in total revenues reflects much higher recycling sales volumes in 2010 as compared to 2009, as well as higher PGM prices realized in 2010.

Revenues from mine production totaled $381.0 million in 2010 (including $28.0 million from by-products), up 24.2% compared to $306.9 million in 2009 (of which $23.6 million was from by-products). Palladium and platinum ounces sold from mine production were 489,400 in 2010, compared to 515,700 ounces in 2009 – slightly lower. The combined average realization on these palladium and platinum sales (including the effects of hedging and of floor and ceiling prices in the underlying agreements) was $721 per ounce in 2010 and $549 per ounce in 2009.

Revenues from PGM recycling increased 106% during 2010, to $168.6 million from $81.8 million in 2009.

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Recycling ounces sold during 2010 totaled 156,100 ounces, an increase of 53.0% compared to the 102,000 ounces sold in 2009. The Company’s combined average realization on recycling sales (which include palladium, platinum and rhodium) increased to $1,046 per ounce in 2010 from $779 per ounce in 2009, paralleling the increases in PGM prices generally. In addition to purchased recycling material, the Company toll processed 235,900 ounces of PGMs during 2010, up from 128,000 tolled ounces in 2009. Overall, recycling volumes processed during 2010 totaled 399,400 ounces of PGMs, up 59.1% from the 251,000 ounces processed in 2009, as stronger PGM prices in 2010 increased the volume of recycled catalytic converters available in the market.

In addition to mine and recycled metal sales, the Company recognized other revenue of $6.2 million and $5.8 million for metal purchased in the open market and resold in 2010 and 2009, respectively.

Costs of Metals Sold - Cost of metals sold, which excludes depletion, depreciation and amortization expense, was $393.7 million in 2010, compared to $290.8 million in 2009, a 35.4% increase. The largest share of this increase was attributable to recycling. Volumes of purchased recycling material were sharply higher in 2010, which along with higher PGM prices increased the total cost to purchase recycling material. Overall, recycling cost of metals sold increased to $157.3 million in 2010 from $75.9 million in 2009. The average acquisition cost of metal purchased in the Company’s recycling segment (including platinum, palladium and rhodium) increased to $1,015 per ounce in 2010 from $674 per ounce in 2009, reflecting higher PGM prices in 2010 in response to strengthened demand from the automotive and investment sectors.

During 2010, the Company’s mining operations produced 485,100 ounces of PGMs, including 374,100 ounces of palladium and 111,000 ounces of platinum. This represented an 8.5% decrease from 2009, when the Company’s mining operations produced 529,900 ounces of PGMs, including 407,000 of palladium and 122,900 ounces of platinum. The Stillwater Mine produced 351,700 ounces of PGMs in 2010, compared with 393,800 ounces of PGMs in 2009, a 10.7% decrease. The East Boulder Mine produced 133,400 ounces of PGMs in 2010, down 2.0% compared with the 136,100 ounces of PGMs produced there in 2009.

The cost of metals sold from mine production, totaled $230.0 million in 2010, compared to $209.1 million in the prior year, a 10.0% increase. The Company’s mining costs increased during 2010 partly as a result of the lower ore grade realized at the Stillwater Mine.

The cost of metals sold for metal purchased in the open market for resale was $6.4 million in 2010, compared to $5.7 million in 2009.

Depletion, depreciation and amortization – Depletion, depreciation and amortization expense was $71.6 million in 2010, compared to $70.4 million in 2009. The higher expense in 2010 was mostly the result of added capital placed into service in 2010.

Marketing - The Company limited its market development efforts for palladium to some extent during 2010. The Company spent $2.4 million in support of marketing programs during 2010, up slightly from $2.0 million in 2009.

General and administrative - Excluding marketing expenses discussed above, general and administrative costs were $33.0 million in 2010, compared to $25.1 million in 2009, a 31.5% increase, due to approximately $1.5 million in acquisition expenses and approximately $5.0 million in contractual support of the Norilsk Nickel secondary offering and increased share-based compensation expense.

Other corporate costs – In 2010, other corporate costs included a $0.6 million provision for uncollectable receivables and advances. In 2009, other corporate costs included a $1.1 million provision for uncollectable receivables and advances and $0.1 million for marking investments to market.

Interest income and expense - Interest income increased to $2.1 million in 2010 from $1.8 million in 2009, reflecting higher interest rates and increased financing income on recycling balances in 2010. The Company’s balance of cash and related liquid assets earning interest increased to $208.4 million at December 31, 2010, from $201.2 million reported at December 31, 2009. Inventories and advances associated with recycling increased to $41.5 million at year-end 2010 from $28.6 million at the end of 2009. The Company’s outstanding long-term debt balance was $196.0 million at December 31, 2010, unchanged from $196.0 million at December 31, 2009. The Company paid off the final $0.1 million of principal on its education impact bonds in May 2009. Interest expense declined to $6.5 million in 2010, from $6.8 million in 2009.

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Other comprehensive income (loss), net of tax - The Company recorded a loss in other comprehensive income of $0.8 million in 2010 compared to a gain of $70,000 in 2009. The 2010 and 2009 activity in each case represented net unrealized gains or losses on investments.

YEAR ENDED DECEMBER 31, 2009 COMPARED TO YEAR ENDED DECEMBER 31, 2008

Revenues - The Company’s total revenues, including proceeds from the sale of by-products, totaled $394.4 million in 2009, a decrease of 53.9% compared to revenues of $855.7 million in 2008. This substantial year-on-year decline in total revenues reflects much lower recycling sales volumes in 2009 as compared to 2008, as well as lower PGM realizations in 2009.

Revenues from mine production totaled $306.9 million in 2009 (including $23.6 million from by-products), compared to $360.4 million in 2008 (of which $36.8 million was from by-products). Palladium and platinum ounces sold from mine production were 515,700 in 2009, compared to 514,100 ounces in 2008 – essentially flat. The combined average realization on these palladium and platinum sales (including the effects of hedging and of floor and ceiling prices in the underlying agreements) was $549 per ounce in 2009 and $630 per ounce in 2008.

Revenues from PGM recycling declined 82.8% during 2009, to $81.8 million from $475.4 million in 2008. Recycling ounces sold during 2009 totaled 102,000 ounces, a decrease of 62.9% compared to the 275,000 ounces sold in 2008. The Company’s combined average realization on recycling sales (which include palladium, platinum and rhodium) decreased substantially to $779 per ounce in 2009 from $1,715 per ounce in 2008, paralleling the drop in PGM prices generally. In addition to purchased recycling material, the Company toll processed 128,000 ounces of PGMs during 2009, up from 126,000 tolled ounces in 2008. Overall, recycling volumes processed during 2009 totaled 251,000 ounces of PGMs, down 36.9% from the 398,100 ounces processed in 2008, as weak PGM prices in 2009 reduced the volume of recycled catalytic converters available in the market.

In addition to mine and recycled metal sales, the Company recognized other revenue of $5.8 million and $20.0 million for metal purchased in the open market and resold in 2009 and 2008, respectively.

Costs of Metals Sold - Cost of metals sold, which excludes depletion, depreciation and amortization expense, was $290.8 million in 2009, compared to $752.0 million in 2008, a 61.3% decrease. The largest share of this decrease was attributable to recycling. Volumes of purchased recycling material were sharply lower in 2009, which along with lower PGM prices reduced the total cost to purchase recycling material. Overall, recycling cost of metals sold declined to $75.9 million in 2009 from $448.4 million in 2008. The average acquisition cost of metal purchased in the Company’s recycling segment (including platinum, palladium and rhodium) decreased to $674 per ounce in 2009 from $1,534 per ounce in 2008, reflecting lower PGM prices in 2009 in response to weakened demand from the automotive sector.

During 2009, the Company’s mining operations produced 529,900 ounces of PGMs, including 407,000 ounces of palladium and 122,900 ounces of platinum. This represented a 6.2% increase from 2008, when the Company’s mining operations produced 498,900 ounces of PGMs, including 384,100 of palladium and 114,800 ounces of platinum. The Stillwater Mine produced 393,800 ounces of PGMs in 2009, compared with 349,400 ounces of PGMs in 2008, a 12.7% increase. The East Boulder Mine produced 136,100 ounces of PGMs in 2009, down 9.0% compared with the 149,500 ounces of PGMs produced there in 2008, but the 2009 production was accomplished with less than 50% of the 2008 workforce.

The cost of metals sold from mine production, despite higher 2009 production, decreased to $209.1 million in 2009, compared to $283.8 million in the prior year, a 26.3% improvement. The Company’s mining costs decreased during 2009 mainly as a result of a lower level of employment, lower prices for key consumables such as fuel, power, steel and explosives, improved efficiencies in mining processes, much reduced reliance on contractors and redirection of mining out of some higher-cost areas.

The cost of metals sold for metal purchased in the open market for resale was $5.7 million in 2009, compared to $19.9 million in 2008.

Depletion, depreciation and amortization – Depletion, depreciation and amortization expense was $70.4 million in 2009, compared to $83.0 million in 2008. To a large extent, the lower expense in 2009 was the result of a $67.3 million impairment adjustment to the carrying value of the East Boulder Mine taken at the end of 2008, resulting in lower amortization rates in 2009.

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Marketing - The Company reduced its market development efforts for palladium to some extent during 2009. The Company spent $2.0 million in support of marketing programs during 2009, down from $5.7 million in 2008.

General and administrative - Excluding marketing expenses discussed above, general and administrative costs were $25.1 million in 2009, compared to $26.7 million in 2008, a 6.0% decrease, as increased share-based compensation expense partially offset other corporate cost reductions.

Other corporate costs – In 2009, corporate adjustments included a $1.1 million provision for uncollectable receivables and advances and $0.1 million for marking investments to market. In 2008, such adjustments included a $67.3 million asset impairment write-down at the East Boulder Mine, a $29.4 million provision for uncollectable receivables and advances (mostly associated with recycling activities), a $3.4 million charge to mark investments to market, and $5.4 million for restructuring costs.

Interest income and expense - Interest income decreased to $1.8 million in 2009 from $11.1 million in 2008, reflecting lower interest rates and much lower financing income on recycling balances in 2009. The Company’s balance of cash and related liquid assets earning interest increased to $201.2 million at December 31, 2009, from $180.8 million reported at December 31, 2008. Inventories and advances associated with recycling increased to $29.0 million at year- end 2009 from $22.1 million at the end of 2008. The Company’s outstanding long-term debt balance was $196.0 million at December 31, 2009, down from $211.0 million at December 31, 2008. The decrease in long-term debt was mostly attributable to a transaction which converted $15.0 million principal balance of the Company’s convertible debentures into approximately 1.84 million shares of common stock. The Company also paid off the final $0.1 million of principal on its education impact bonds in May 2009. Interest expense declined to $6.8 million in 2009, from $9.7 million in 2008; the Company replaced its outstanding credit facilities with a 1.875% convertible debenture offering in March 2008.

Other comprehensive income (loss), net of tax - The Company recorded a gain in other comprehensive income of $70,000 in 2009 compared to a gain of $5.9 million in 2008. The 2009 gain represented unrealized gains on investments. The 2008 gain included $12.8 million of realized hedging losses reclassified to income, partially offset by $6.3 million representing the change in fair value of derivatives held, and $0.7 of unrealized losses on investments.

LIQUIDITY AND CAPITAL RESOURCES

For 2010, net cash provided by operating activities was $123.9 million compared to $59.7 million and $114.2 million for 2009 and 2008, respectively. The Company’s net cash flow from operating activities is affected by several key factors, including net realized prices for its products, cash costs of production, and the level of PGM production from the mines. Mining productivity rates and ore grades in turn can affect both PGM production and cash costs of production. Net cash flow from operations also includes changes in non-cash working capital, including changes to inventories and advances.

At December 31, 2010, the Company’s available balance of cash and cash equivalents and highly liquid short-term investments (excluding restricted cash) was $208.4 million and it reported $196.0 million of debt outstanding. Available cash and cash equivalents at December 31, 2010, was $19.4 million. Corresponding balances at December 31, 2009, included $166.7 million of available cash and cash equivalents, $196.0 million of outstanding debt, and available cash plus liquid investments of $201.2 million. The Company exchanged $15 million face amount of its outstanding convertible debentures for about 1.84 million common shares during the fourth quarter of 2009. The remaining $166.5 million of convertible debentures outstanding will reach their date of first call in March 2013, and the Company believes most holders are likely to convert their debentures, should the share price be at or above the $23.51 conversion price, or redeem them at par at that time.

The Company, at interest rate levels prevailing at December 31, 2010, will be required to fund approximately $5.5 million in total interest payments during 2011 related to its outstanding debt obligations. No principal payments against outstanding debt are scheduled to come due in 2011. With its current liquidity position, the Company has elected not to put in place a revolving credit agreement at this time. While the lack of a credit agreement may create some vulnerability, the Company believes that its liquidity on hand is adequate to cover its needs for the foreseeable future.

During the fourth quarter of 2009, the Company filed a $450 million shelf registration statement. The registration became effective on December 8, 2009, and permits the Company to issue any of various public debt or equity

72 instruments for financing purposes so long as the registration statement remains effective. The Company is generating significant cash flow at the current time and will also consider its financing needs as its plans develop and opportunities warrant. In this connection, the development of the Marathon property will require significant capital and the debentures may require cash payments, whether upon maturity or earlier redemption. Management believes that the shelf registration statement may facilitate access to additional liquidity in the future. However, there is no assurance that debt or equity capital would be available to the Company in the public markets in the event the Company determines to issue securities under the shelf registration.

In December of 2009, Standard and Poor’s upgraded the Company’s debt rating from B- to B, citing improved market conditions and adequate liquidity. Both Moody’s Investors Service and Standard and Poor’s had downgraded the Company’s corporate credit rating by two notches during 2008 as economic conditions deteriorated. At issue had been the Company’s strong dependence on its automotive agreements, lack of geographic or product diversity, metal market price volatility, and difficult cost structure.

The Company’s financial performance is affected by changes in PGM prices. Absent separate hedging arrangements, any change in the price of platinum or palladium generally would flow through almost dollar-for-dollar to cash flow from operations, subject only to certain costs – severance taxes and royalties on mine production – which adjust upward or downward with market prices. At the forecasted 2011 mine production level of 500,000 combined PGM ounces, a one- dollar change in the price of platinum would affect annual cash generated from mining operations by about $0.1 million, and a corresponding change in the price of palladium would affect annual cash generation from mining operations by about $0.4 million. The sensitivity of the recycling business to changes in platinum and palladium prices is more muted and varies according to the provisions in the various recycling agreements. In the Company’s recycling activities, upon purchasing recycled material for processing the Company simultaneously enters into a fixed forward contract that determines the future selling price of the contained PGMs, effectively locking in a sales margin.

Changes in the cash costs of production generally flow through dollar-for-dollar into cash flow from operations. A reduction due to grade in total mine production of 10%, or about 50,000 ounces per year, would reduce cash flow from operations by an estimated $52 million per year at the price and cost levels prevailing at December 31, 2010.

During the third quarter of 2010, the Company revised its cash management guidelines to extend the available investment maturities on a portion of its cash balances, broaden the suite of permissible investments, and adjust the percentage limits on certain classes of investments. As a result, during 2010 most of the Company’s cash holdings were transferred into short-term investments. All of these short-term investments remain highly liquid, but technically they no longer meet the strict definition of cash and cash equivalents. Net cash used in investing activities was $272.0 million, $54.7 million and $74.6 million in 2010, 2009 and 2008, respectively. The Company’s investing activities primarily represent capital expenditures and net sales and purchases of short term investments. Capital expenditures totaled $50.3 million, $39.5 million and $82.3 million in 2010, 2009 and 2008, respectively. The Company also expended $67.5 million in cash (along with newly issued common shares with a fair value of $73.4 million) in 2010 and $0.9 million in 2008 to acquire equity interests in exploration companies. No such acquisitions were made in 2009.

All significant company-wide repair and maintenance costs in connection with planned major maintenance activities are expensed as incurred. The Company does not accrue in advance for major maintenance activities, but, when practicable, tries to disclose in advance in its public filings any planned major maintenance activities that may affect operations.

Net cash provided by or used in financing activities equaled $0.8 million, $(0.1) million and $60.7 million in 2010, 2009 and 2008, respectively. Financing activities in 2008 included retiring the Company’s bank facility and replacing it with $181.5 million of convertible debentures.

Convertible Debentures

On March 12, 2008, the Company issued and sold $181.5 million aggregate principal amount of senior convertible debentures due in 2028 (debentures). The debentures pay interest at 1.875% per annum, payable semi-annually on March 15 and September 15 of each year, commencing September 15, 2008. The debentures will mature on March 15, 2028, subject to earlier repurchase or conversion. Each $1,000 principal amount of debentures is initially convertible, at the option of the holders, into approximately 42.5351 shares of the Company’s common stock, at any time prior to the maturity date. The conversion rate is subject to certain adjustments, but will not be adjusted for accrued interest or any unpaid interest. The conversion rate initially represents a conversion price of $23.51 per share. Holders of the debentures

73 may require the Company to repurchase all or a portion of their debentures on March 15, 2013, March 15, 2018 and March 15, 2023, or upon the occurrence of certain events including a change in control. The Company may redeem the debentures for cash at any time on or after March 22, 2013.

The debentures were sold to an “accredited investor” within the meaning of Rule 501 under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon the private placement exemption afforded by Section 4(2) of the Securities Act. The initial investor offered and resold the debentures to “qualified institutional buyers” under Rule 144A of the Securities Act. An affiliate of MMC Norilsk Nickel, with the approval of the Company’s independent directors, purchased $80 million of the debentures.

In October 2009, the Company undertook the exchange of $15 million face amount of the convertible debentures in exchange for 1.84 million shares of the Company’s common stock. The debentures so acquired have been retired, leaving $166.5 million face value of the debentures outstanding at December 31, 2010.

CONTRACTUAL OBLIGATIONS

The Company is obligated to make future payments under various debt agreements and regulatory obligations. The following table represents significant contractual cash obligations and other commercial commitments and regulatory commitments, including related interest payments, as of December 31, 2010:

(in thousands) 2011 2012 2013 2014 2015 Thereafter Total Convertible debentures $ - $ - $ 166,500 $ - $ - $ - $ 166,500 Exempt Facility Revenue Bonds - - - - - 30,000 30,000 Operating leases 318 297 264 233 - - 1,112 Asset retirement obligations - - - - - 144,271 144,271 Payments of interest (1) 5,522 5,522 3,961 2,400 2,400 10,800 30,605 Other liabilities 10,963 4,425 - - - - 15,388 Total $ 16,803 $ 10,244 $ 170,725 $ 2,633 $ 2,400 $ 185,071 $ 387,876

(1) Interest payments on the convertible debentures noted in the above table are calculated up to March 15, 2013, the date the holders of the debentures can exercise their put option.

Interest payments noted in the table above assume no changes in interest rates. Amounts included in other liabilities that are anticipated to be paid in 2011 and 2012 include property taxes and severance taxes.

FACTORS THAT MAY AFFECT FUTURE RESULTS AND FINANCIAL CONDITION

Some statements contained in this report are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and, therefore, involve uncertainties or risks that could cause actual results to differ materially. These statements may contain words such as “desires,” "believes," "anticipates," "plans," "expects," "intends," "estimates" or similar expressions. Such statements also include, but are not limited to, comments regarding the acquisition and plans for Marathon PGM Corporation; the global automotive market and the outlook for automobile production and sales; contract negotiations and the future ability to sell the Company’s products; expansion plans and realignment of operations; future costs, grade, production and recovery rates; permitting; labor matters; financing needs and the terms and availability of future credit facilities; capital expenditures; increases in processing capacity; cost reduction measures; safety performance; timing for engineering studies; environmental permitting and compliance; litigation exposures; and anticipated changes in global supply and demand and prices for PGM materials. These statements are not guarantees of the Company's future performance and are subject to risks, uncertainties and other important factors that could cause its actual performance or achievements to differ materially from those expressed or implied by these forward-looking statements. Additional information regarding factors that could cause results to differ materially from management's expectations is found in the section entitled "Business, Risk Factors and Properties – Risk Factors" above.

The Company intends that the forward-looking statements contained herein be subject to the above-mentioned statutory safe harbors. Investors are cautioned not to rely on forward-looking statements. The Company disclaims any obligation to update forward-looking statements.

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CRITICAL ACCOUNTING POLICIES

Mine Development Expenditures — Capitalization and Amortization

Mining operations are inherently capital intensive, generally requiring substantial capital investment for the initial and concurrent development and infrastructure of the mine. Many of these expenditures are necessarily incurred well in advance of actual extraction of ore. Underground mining operations such as those conducted by the Company require driving adits and sinking shafts that provide access to the underground ore body and construction and development of infrastructure, including electrical and ventilation systems, rail and other forms of transportation, shop facilities, material handling areas and hoisting systems. Ore mining and removal operations require significant underground facilities used to conduct mining operations and to transport the ore out of the mine to processing facilities located above ground.

Contemporaneously with mining, additional development is undertaken to provide access to ongoing extensions of the ore body, allowing more ore to be produced. In addition to the development costs that have been previously incurred, these ongoing development expenditures are necessary to access and support all future mining activities.

Mine development expenditures incurred to date to increase existing production, develop new ore bodies or develop mineral property substantially in advance of production are capitalized. Mine development expenditures consist of vertical shafts, multiple surface adits and underground infrastructure development including footwall laterals, ramps, rail and transportation, electrical and ventilation systems, shop facilities, material handling areas, ore handling facilities, dewatering and pumping facilities. Many such facilities are required not only for current operations, but also for all future planned operations.

Expenditures incurred to sustain existing production and access specific ore reserve blocks or stopes provide benefit to ore reserve production over limited periods of time (secondary development) and are charged to operations as incurred. These costs include ramp and stope access excavations from primary haulage levels (footwall laterals), stope material rehandling/laydown excavations, stope ore and waste pass excavations and chute installations, stope ventilation raise excavations and stope utility and pipe raise excavations.

The Company calculates amortization of capitalized mine development costs by the application of an amortization rate to current production. The amortization rate for each relevant geological area within a mine is based upon un- amortized capitalized mine development costs and the related ore reserves associated with that area. Capital development expenditures are added to the un-amortized capitalized mine development costs as the related development assets are placed into service. In the calculation of the amortization rate, changes in ore reserves are accounted for as a prospective change in estimate. Ore reserves and the further benefit of capitalized mine development costs are based on significant management assumptions. Any changes in these assumptions, such as a change in the mine plan or a change in estimated proven and probable ore reserves could have a material effect on the expected period of benefit resulting in a potentially significant change in the amortization rate and/or the valuations of related assets. The Company’s proven ore reserves are generally expected to be extracted utilizing its existing mine development infrastructure. Additional capital expenditures will be required to access the Company’s estimated probable ore reserves. These anticipated capital expenditures are not included in the current calculation of depletion, depreciation and amortization.

The Company’s method of accounting for development costs is as follows:

• Unamortized costs of the shaft at the Stillwater Mine and the initial development at the East Boulder Mine are treated as life-of-mine infrastructure costs, amortized over total proven and probable reserves at each location, and • All ongoing development costs of footwall laterals, ramps and associated facilities are amortized over the ore reserves in the immediate and geologically relevant vicinity of the development.

The calculation of the amortization rate, and therefore the annual amortization charge to operations, could be materially affected to the extent that actual production in the future is different from current forecasts of production based on proven and probable ore reserves. This would generally occur to the extent that there were significant changes in any of the factors or assumptions used in determining ore reserves. These factors could include: (1) an expansion of proven and probable ore reserves through development activities, (2) differences between estimated and actual costs of mining due to differences in ore grades or metal recovery rates, and (3) differences between actual commodity prices and commodity price assumptions used in the estimation of ore reserves.

75

Asset Impairment

The Company reviews and evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Impairment is considered to exist if total estimated future cash flows on an undiscounted basis are less than the carrying amount of the asset. The estimation of future cash flows takes into account estimates of recoverable ounces, PGM prices (long-term sales contract prices and historical pricing trends or third party projections of future prices rather than prices at a point in time as an indicator of longer-term future prices), production levels, and capital and reclamation expenditures, all based on life-of-mine plans and projections. If the assets are impaired, a determination of fair market value is performed, and if fair market value is lower than the carrying value of the assets, the assets are reduced to their fair market value.

Foreign Currency Transaction

With the acquisition during 2010 of certain Canadian assets, the Company now regularly incurs certain capital and operating expenditures in Canadian dollars and within Canadian entities. The Company has determined that the functional currency for these Canadian activities will be the U.S. dollar and therefore reflects all assets, liabilities and expenditures in U.S. dollars for accounting purposes. The Company uses a monthly average exchange rate for converting minor Canadian dollar expenditures into U.S. dollars, and uses the actual exchange rate incurred in accounting for larger transactions. For balance sheet purposes, Canadian dollar monetary assets and liabilities are recorded based on the exchange rate at the end of the respective period. Any net accounting difference that results from exchange rate differences is recorded as a foreign exchange gain or loss for the respective period on the consolidated statement of operations.

Income Taxes

With the acquisition during the fourth quarter of 2010 of certain Canadian assets, the Company now is subject to Canadian federal and provincial income taxes on its Canadian activities as well as to U.S. state and federal income taxes.

Income taxes are determined using the asset and liability approach. This method gives consideration to the future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities based on currently enacted tax rates. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred taxes associated with the Company’s Canadian activities are recorded using the assumption that future earning and profits associated with these activities will not be repatriated into the U.S. but will be fully utilized in Canada.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Each quarter, management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. A valuation allowance has been provided at December 31, 2010 and 2009, for the portion of the Company’s net deferred tax assets for which it is “more likely than not” that they will not be realized.

Post-closure Reclamation Costs

The Company recognizes the fair value of a liability for an asset retirement obligation in the period in which it is incurred if a reasonable estimate of fair value can be made. The fair value of the liability is added to the carrying amount of the associated asset and this additional carrying amount is depreciated over the life of the asset. The liability is accreted at the end of each period through charges to operating expense. If the obligation ultimately is settled for other than the carrying amount of the liability, the Company will recognize a gain or loss at the time of settlement.

Accounting for reclamation obligations requires management to make estimates for each mining operation of the future costs the Company will incur to complete final reclamation work required to comply with existing laws and regulations. Actual costs incurred in future periods could differ from amounts estimated. Additionally, future changes to environmental laws and regulations could increase the extent of reclamation and remediation work that the Company is required to perform. Any such increases in future costs could materially impact the amounts charged to operations for reclamation and remediation.

The Company reviewed its asset retirement assumptions at December 31, 2010 and 2009, and recorded a reduction at December 31, 2009, of $0.6 million and $0.8 million for the Stillwater Mine and the East Boulder Mine, respectively,

76 due to an increase in the estimated mine lives of both mines. No corresponding adjustment was required at December 31, 2010. See Note 16 “Asset Retirement Obligation” to the Company’s 2010 audited consolidated financial statements for further information.

Derivative Instruments

The Company from time to time enters into derivative financial instruments, including fixed forward sales, cashless put and call option collars and financially settled forward sales to manage the effect of changes in the prices of palladium and platinum on the Company’s revenue. Derivatives are reported on the balance sheet at fair value and, if the derivative is not designated as a hedging instrument, changes in fair value are recognized in earnings in the period of change. If the derivative is designated as a hedge and to the extent such hedge is determined to be highly effective, changes in fair value are either (a) offset by the change in fair value of the hedged asset or liability (if applicable) or (b) reported as a component of other comprehensive income in the period of change, and subsequently recognized in the determination of net income in the period the offsetting hedged transaction occurs. The Company primarily uses derivatives to hedge metal prices and to manage interest rate risk. The Company also enters into financially settled forwards related to its recycling segment which are not accounted for as cash flow hedges. The realized and unrealized gains or losses are recognized in net income in each period. See Note 6 “Derivative Instruments” to the Company’s 2010 audited consolidated financial statements for further information.

ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The Company is exposed to market risk, including the effects of adverse changes in metal prices and interest rates as discussed below.

Commodity Price Risk

The Company produces and sells palladium, platinum and associated by-product metals directly to its customers and also through third parties. As a result, financial performance can be materially affected when prices for these commodities fluctuate. In order to manage commodity price risk and to reduce the impact of fluctuation in prices, the Company has entered into long-term agreements with suppliers and customers, from time to time has employed various derivative financial instruments and attempts to maintain adequate liquidity to sustain operations during a downturn in PGM prices. Because the Company hedges only with instruments that have a high correlation with the value of the hedged transactions, changes in the fair value of the derivatives are expected to be highly effective in offsetting changes in the value of the hedged transaction.

The Company’s remaining long-term automotive supply agreement with Ford Motor Company expired on December 31, 2010. The floor prices in that agreement applied to 70% of the Company’s mined platinum ounces and 80% of the Company’s mined palladium ounces. Replacement supply agreements are not likely to include any comparable floor price protection, and consequently the Company’s mining revenues going forward will be more fully exposed to prevailing market prices. Without these pricing provisions, the risk increases that the Company may not be able to operate profitably during any future downturns in PGM prices.

The Company customarily enters into fixed forward sales and from time to time in the past has entered into financially settled forward sales transactions that may or may not be accounted for as cash-flow hedges to mitigate the price risk in its PGM recycling and mine production activities. Under these fixed forward transactions, typically metals contained in the spent catalytic materials are sold forward at the time the materials are purchased and then are delivered against the fixed forward contracts when the finished ounces are recovered. The Company believes such transactions qualify for the exception to hedge accounting treatment provided for in the accounting literature and so has elected to account for these transactions as normal purchases and normal sales.

Financially settled forward sales provide another mechanism to offset fluctuations in metal prices associated with future production, particularly in circumstances where the Company elects to retain control of the final disposition of the metal. In financially settled forward sales, the parties agree in advance to a net financial settlement in the future based on the difference between the market price of the metal on the settlement date and a forward price set at inception. Consequently, at the settlement date, the Company receives the difference between the forward price and the market price if the market price is below the forward price, and the Company pays the difference between the forward price and the market price if the market price is above the forward price. No metal changes hands between the parties in these

77 financially settled transactions. The Company generally has accounted for financially settled forward transactions as cash flow hedges, as they are not eligible for treatment as normal purchases and normal sales. However, if the Company determines not to document them as cash flow hedges, these transactions are marked to market in each accounting period and the realized and unrealized gains or losses are recognized in net income in each period. As of December 31, 2010 and 2009, the Company was not party to any financially settled forward agreements.

Periodically, the Company also has entered into financially settled forwards related to its recycling segment which are not accounted for as cash flow hedges. The realized and unrealized gains or losses on such transactions therefore are recognized in net income in each period.

Interest Rate Risk

At December 31, 2010, all of the Company’s outstanding long-term debt was subject to fixed rates of interest. Interest income on payments to the Company’s recycling suppliers is generally linked to short-term inter-bank rates.

The Company’s convertible debentures and industrial revenue bonds do not contain financial covenants, other than change in control protection and, in the case of the convertible debentures, investor make-whole provisions. Consequently, the Company is not subject to conventional financial covenants at this time.

Foreign Currency Risk

With the acquisition of certain Canadian assets during the fourth quarter of 2010, the Company has gained some modest exposure to fluctuations in the exchange rate between the Canadian dollar and the U.S. dollar. While this exposure is currently limited to Canadian dollar cash deposits and expenses incurred for the services of a few Canadian employees and contractors along with some associated support costs, as the Company’s commitments there expand in the future, the exposure may become more material. The Company does not hedge this exposure at present, but may consider doing so in the future as the scale of its Canadian operations grows.

78

ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders Stillwater Mining Company and Subsidiaries:

We have audited the accompanying consolidated balance sheets of Stillwater Mining Company and subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of operations and comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2010. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Stillwater Mining Company and subsidiaries as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Stillwater Mining Company’s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 22, 2011 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ KPMG LLP

Billings, Montana February 22, 2011

79

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders Stillwater Mining Company and Subsidiaries:

We have audited Stillwater Mining Company’s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Stillwater Mining Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, Stillwater Mining Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Stillwater Mining Company and subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of operations and comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2010, and our report dated February 22, 2011, expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP Billings, Montana February 22, 2011

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STILLWATER MINING COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share data)

Year ended December 31, 2010 2009 2008

REVENUES Mine production $ 381,044 $ 306,892 $ 360,364 PGM recycling 168,612 81,788 475,388 Other 6,222 5,752 19,980 Total revenues 555,878 394,432 855,732

COSTS AND EXPENSES Costs of metals sold: Mine production 229,986 209,140 283,793 PGM recycling 157,310 75,920 448,351 Other 6,379 5,741 19,892 Total costs of metals sold 393,675 290,801 752,036 Depletion, depreciation and amortization: Mine production 71,121 70,239 82,792 PGM recycling 472 178 192 Total depletion, depreciation and amortization 71,593 70,417 82,984 Total costs of revenues 465,268 361,218 835,020 Marketing 2,415 1,987 5,705 General and administrative 33,016 25,080 26,712 Restructuring - - 5,420 Losses on trade receivables and inventory purchases 595 1,051 29,409 Impairments of long-term investments and property, plant and equipment - 119 70,628 (Gain)/loss on disposal of property, plant and equipment (128) 689 196 Total costs and expenses 501,166 390,144 973,090

OPERATING INCOME (LOSS) 54,712 4,288 (117,358)

OTHER INCOME (EXPENSE) Other (6) 79 144 Interest income 2,144 1,846 11,103 Interest expense (6,536) (6,801) (9,718) Foreign currency transaction gain 51 - - Induced conversion loss - (8,097) - INCOME (LOSS) BEFORE INCOME TAX BENEFIT (PROVISION) 50,365 (8,685) (115,829) Income tax benefit (provision) - 30 32

NET INCOME (LOSS) 50,365 (8,655) (115,797) Other comprehensive income (loss), net of tax (762) 70 5,865

COMPREHENSIVE INCOME (LOSS) $ 49,603 $ (8,585) $ (109,932)

See accompanying notes to the consolidated financial statements.

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STILLWATER MINING COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share data)

(Continued) Year ended December 31, 2010 2009 2008

BASIC AND DILUTED INCOME (LOSS) PER SHARE

Net income (loss) $ 50,365 $ (8,655) $ (115,797) Weighted average common shares outstanding Basic 97,967 94,852 93,025 Diluted 99,209 94,852 93,025

Basic income (loss) per share Net income (loss) $ 0.51 $ (0.09) $ (1.24)

Diluted income (loss) per share Net income (loss) $ 0.51 $ (0.09) $ (1.24)

See accompanying notes to the consolidated financial statements.

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STILLWATER MINING COMPANY

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

December 31, 2010 2009

ASSETS Current assets Cash and cash equivalents $ 19,363 $ 166,656 Investments, at fair market value 188,988 34,515 Inventories 101,806 88,967 Trade receivables 7,380 2,073 Deferred income taxes 17,890 18,130 Other current assets 13,940 8,680 Total current assets 349,367 319,021 Property, plant and equipment, net 509,787 358,866 Restricted cash 38,070 38,045 Other noncurrent assets 12,246 9,263 Total assets $ 909,470 $ 725,195

LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $ 19,405 $ 8,901 Accrued compensation and benefits 24,746 26,481 Property, production and franchise taxes payable 10,999 10,405 Other current liabilities 3,052 3,689 Total current liabilities 58,202 49,476 Long-term debt 196,010 195,977 Deferred income taxes 53,859 18,130 Accrued workers compensation 7,155 4,737 Asset retirement obligation 6,747 6,209 Other noncurrent liabilities 4,425 3,855 Total liabilities $ 326,398 $ 278,384

Stockholders' equity Preferred stock, $0.01 par value, 1,000,000 shares authorized, none issued - - Common stock, $0.01 par value, 200,000,000 shares authorized, 101,881,816 and 96,732,185 shares issued and outstanding 1,019 967 Paid-in capital 761,475 674,869 Accumulated deficit (178,570) (228,935) Accumulated other comprehensive loss (852) (90) Total stockholders’ equity 583,072 446,811 Total liabilities and stockholders’ equity $ 909,470 $ 725,195

See accompanying notes to the consolidated financial statements.

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STILLWATER MINING COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Year ended December 31, 2010 2009 2008 CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 50,365 $ (8,655) $ (115,797) Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depletion, depreciation and amortization 71,593 70,417 82,984 Foreign currency transaction gain (51) - - Lower of cost or market inventory adjustment - 6,626 8,907 Induced conversion loss - 8,097 - Restructuring costs - - 5,420 Impairments of long-term investments and property, plant and equipment - 119 70,628 Losses on trade receivables and inventory purchases 595 1,051 29,409 (Gain)/loss on disposal of property, plant and equipment (128) 689 196 Accretion of asset retirement obligation 538 606 885 Amortization of debt issuance costs 979 1,036 3,214 Share based compensation and other benefits 12,366 11,441 11,055

Changes in operating assets and liabilities: Inventories (12,474) (22,793) 35,893 Trade receivables (5,307) 296 6,365 Accrued compensation and benefits (1,735) 2,379 (1,968) Accounts payable 10,202 (5,761) (3,560) Property, production and franchise taxes payable 1,164 (937) 566 Workers compensation 2,418 (2,024) (3,221) Restricted cash (25) (2,450) (9,540) Other (6,603) (465) (7,193)

NET CASH PROVIDED BY OPERATING ACTIVITIES 123,897 59,672 114,243 CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (50,263) (39,534) (82,277) Purchase of Marathon PGM assets (63,649) - - Purchase of long-term investment (3,858) - (948) Proceeds from disposal of property, plant and equipment 470 603 329 Purchases of investments (243,693) (47,551) (41,095) Proceeds from maturities of investments 88,959 31,759 49,424

NET CASH USED IN INVESTING ACTIVITIES (272,034) (54,723) (74,567)

CASH FLOWS FROM FINANCING ACTIVITIES Principal payments on debt - (97) (98,539) Payments for debt issuance costs - - (5,098) Proceeds from issuance of convertible debentures - - 181,500 Issuance of common stock 844 9 2,990 Restricted cash - - (20,170)

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 844 (88) 60,683

CASH AND CASH EQUIVALENTS Net increase (decrease) (147,293) 4,861 100,359 Balance at beginning of period 166,656 161,795 61,436 BALANCE AT END OF PERIOD $ 19,363 $ 166,656 $ 161,795

See accompanying notes to the consolidated financial statements.

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STILLWATER MINING COMPANY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands)

Total Common Shares Common Accumulated Other Stockholders' Outstanding Stock Paid-in Capital Accumulated Deficit Comprehensive Loss Equity BALANCE AT DECEMBER 31, 2007 92,405 $ 924 $ 626,625 $ (104,483) $ (6,025) $ 517,041 Net loss - - - (115,797) - (115,797) Change in net unrealized gains on derivative financial instruments - - - - 6,533 6,533 Change in fair market value of securities - - - - (668) (668) Common stock issued under employee benefit plans 815 8 5,984 - - 5,992 Stock option expense - - 380 - - 380 Common stock issued under stock plans 237 3 2,987 - - 2,990 Common stock issued under Directors' deferral plan 8 2 59 - - 61 Nonvested shares of common stock granted to officers and employees 201 - - - - - Amortization of unearned nonvested stock - - 4,654 - - 4,654 Forfeiture of nonvested stock - - (32) - - (32)

BALANCE AT DECEMBER 31, 2008 93,666 $ 937 $ 640,657 $ (220,280) $ (160) $ 421,154 Net loss - - - (8,655) - (8,655) Change in fair market value of securities - - - - 70 70 Common stock issued under employee benefit plans 887 9 4,758 - - 4,767 Stock option expense - - 238 - - 238 Common stock issued under stock plans 2 - 9 - - 9 Common stock issued under Directors' deferral plan 7 - 32 - - 32 Nonvested shares of common stock granted to officers and employees 327 3 - - - 3 Common stock issued for conversion of long-term debt 1,843 18 22,774 - - 22,792 Amortization of unearned nonvested stock - - 6,463 - - 6,463 Forfeiture of nonvested stock - - (62) - - (62) BALANCE AT DECEMBER 31, 2009 96,732 $ 967 $ 674,869 $ (228,935) $ (90) $ 446,811 Net income - - - 50,365 - 50,365 Change in fair market value of securities - - - - (762) (762) Common stock issued under employee benefit plans 319 3 4,442 - - 4,445 Stock option expense - - 160 - - 160 Common stock issued under stock plans 90 1 843 - - 844 Common stock issued under Directors' deferral plan 3 - 75 - - 75 Nonvested shares of common stock granted to officers and employees 856 9 - - - 9 Common stock issued for acquisition of Marathon PGM assets 3,882 39 73,409 - - 73,448 Amortization of unearned nonvested stock - - 7,775 - - 7,775 Forfeiture of nonvested stock - - (98) - - (98)

BALANCE AT DECEMBER 31, 2010 101,882 $ 1,019 $ 761,475 $ (178,570) $ (852) $ 583,072

See accompanying notes to the consolidated financial statements.

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STILLWATER MINING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 NATURE OF OPERATIONS

Stillwater Mining Company (the Company) is engaged in the development, extraction, processing, refining and marketing of palladium, platinum and associated metals (platinum group metals or PGMs) from a geological formation in south central Montana known as the J-M Reef and from the recycling of spent catalytic converters. The J-M Reef is a twenty-eight (28) mile long geologic formation containing the largest known deposit of platinum group metals (PGMs) in the United States.

The Company conducts mining operations at the Stillwater Mine near Nye, Montana, and at the East Boulder Mine near Big Timber, Montana. Ore extraction at both mines takes place within the J-M Reef. The Company operates concentrating plants at each mining operation to upgrade the mined production into a concentrate form. The Company operates a smelter and base metal refinery at Columbus, Montana which further upgrades the mined concentrate into a PGM-rich filter cake. The filter cake is shipped to third-party custom refiners for final refining before being sold to third parties.

Besides processing mine concentrates, the Company also recycles spent catalyst material at the smelter and base metal refinery to recover the contained PGMs – palladium, platinum and rhodium. The Company currently has catalyst sourcing arrangements with various suppliers who ship spent catalysts to the Company for processing to recover the PGMs. The Company smelts and refines the spent catalysts within the same process stream as the mined production.

The Company’s operations can be significantly affected by risks and uncertainties associated with the mining and recycling industry as well as those specifically related to its operations. One of the most significant risks and uncertainties the Company faces is price volatility of palladium and platinum.

Additional risks and uncertainties include but are not limited to the following: economic and political events affecting supply and demand for these metals, mineral reserve estimation, environmental restrictions and obligations, governmental regulations, ownership of and access to mineral reserves, stable workforce and increased surety requirements.

The Company evaluates subsequent events through the date the financial statements are issued. No subsequent events were identified that required additional disclosure through the date of this filing.

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of Stillwater Mining Company and its wholly owned subsidiaries (collectively referred to as the “Company”). All intercompany transactions and balances have been eliminated in consolidation.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of all cash balances and all highly liquid investments purchased with an original maturity of three months or less.

RESTRICTED CASH

Restricted cash consists of cash equivalents that have been posted as collateral on outstanding letters of credit. The restrictions on the balances lapse upon expiration of the letters of credit which currently have terms of one year or less. Restricted cash is classified as noncurrent as the Company anticipates renewing the letters of credit (associated with reclamation obligations) upon expiration.

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INVESTMENTS

Investment securities at December 31, 2010 and 2009, consist of a mutual fund and federal agency notes and commercial paper with stated maturities less than two years. All securities are deemed by management to be available- for-sale and are reported at fair value. Unrealized holding gains and losses on available-for-sale securities are excluded from earnings and are reported as a separate component of other comprehensive income (loss) until realized. A decline in the market value of any available-for-sale security below cost that is deemed to be other-than-temporary results in a reduction of the carrying amount of the security to fair value. The impairment is charged to earnings and a new cost basis for the security is established.

The Company’s long-term investments were originally recorded at cost due to less than 20% equity ownership interest and no significant Company control over the investees. A decline in the market value of these long-term investments that is deemed to be other-than-temporary will result in a reduction of the carrying amount of the investment to fair value. The impairment is charged to earnings and a new cost basis for the investment is established.

INVENTORIES

Metals inventories are carried at the lower of current realizable value or average cost taking into consideration the Company’s long-term sales contracts and average unit costs. Production costs include the cost of direct labor and materials, depletion, depreciation and amortization, and overhead costs relating to mining and processing activities. Materials and supplies inventories are valued at the lower of average cost or fair market value.

RECEIVABLES

Trade receivables and other receivable balances recorded in other current assets are reported at outstanding principal amounts, net of an allowance for doubtful accounts. Management evaluates the collectability of receivable account balances to determine the allowance, if any. Management considers the other party’s credit risk and financial condition, as well as current and projected economic and market conditions, in determining the amount of the allowance. Receivable balances are written off when management determines that the balance is uncollectable. The Company determined that no allowance against its receivable balances at December 31, 2010 were necessary. The Company wrote off $0.6 million and $3.4 million of its trade receivable balance in 2009 and 2008, respectively, when it was determined that ultimate repayment was questionable.

PROPERTY, PLANT AND EQUIPMENT

Plant facilities and equipment are recorded at cost and depreciated using the straight-line method over estimated useful lives ranging from three to seven years or, for capital leases, the term of the related leases, if shorter. Maintenance and repairs are charged to cost of revenues as incurred.

Capitalized mine development costs are expenditures incurred to increase existing production, develop new ore bodies or develop mineral property substantially in advance of production. Capitalized mine development costs include a vertical shaft, multiple surface adits and underground infrastructure development including footwall laterals, ramps, rail and transportation, electrical and ventilation systems, shop facilities, material handling areas, ore handling facilities, dewatering and pumping facilities. These expenditures are capitalized and amortized over the life of the mine or over a shorter mining period, depending on the period benefited by those expenditures, using the units-of-production method. The Company utilizes total proven and probable ore reserves, measured in tons, as the basis for determining the life of mine and uses the ore reserves in the immediate and relevant vicinity as the basis for determining the shorter mining period.

The Company calculates amortization of capitalized mine development costs in any vicinity by applying an amortization rate to the relevant current production. The amortization rates are each based upon a ratio of un-amortized capitalized mine development costs to the related ore reserves. Capital development expenditures are added to the un- amortized capitalized mine development costs and amortization rates updated as the related assets are placed into service. In the calculation of the amortization rate, changes in ore reserves are accounted for as a prospective change in estimate. Ore reserves and the further benefit of capitalized mine development costs are determined based on management assumptions. Any significant changes in these assumptions, such as a change in the mine plan or a change in estimated proven and probable ore reserves, could have a material effect on the expected period of benefit resulting in a potentially significant change in the amortization rate and/or the valuations of related assets. The Company’s proven ore reserves are

87 generally expected to be extracted utilizing its existing mine development infrastructure. Additional capital expenditures will be required to access the Company’s estimated probable ore reserves. These anticipated capital expenditures are not included in the current calculation of depletion, depreciation and amortization.

Expenditures incurred to sustain existing production and directly access specific ore reserve blocks or stopes provide benefit to ore reserve production over limited periods of time (secondary development) and are charged to operations as incurred. These costs include ramp and stope access excavations from the primary haulage levels (footwall laterals), stope material rehandling/laydown excavations, stope ore and waste pass excavations and chute installations, stope ventilation raise excavations and stope utility and pipe raise excavations.

Interest is capitalized on expenditures related to major construction or development projects and is amortized using the same method as the related asset. Interest capitalization is discontinued when the asset is placed into operation or when development and construction cease.

LEASES

The Company classifies a lease as either capital or operating. All capital leases are depreciated either over the shorter of the useful life of the asset or over the lease term.

ASSET IMPAIRMENT

The Company reviews and evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts of its assets may not be recoverable. Impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the asset. Future cash flows include estimates of recoverable ounces, PGM prices (historical prices or third-party projections of future prices, long-term sales contracts prices, price trends and related factors), production levels and capital and reclamation expenditures, all based on life-of-mine plans and projections. If the assets are impaired, a calculation of fair market value is performed, and if the fair market value is lower than the carrying value of the assets, the assets are reduced to their fair market value.

Assumptions underlying future cash flows are subject to risks and uncertainties. Any differences between significant assumptions and market conditions such as PGM prices, lower than expected recoverable ounces, and/or the Company’s operating performance could have a material effect on the Company’s determination of ore reserves, or its ability to recover the carrying amounts of its long-lived assets resulting in potential additional impairment charges.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company’s non-derivative financial instruments consist primarily of cash equivalents, trade receivables, investments, revenue bond debt, and capital lease obligations. The carrying amounts of cash equivalents and trade receivables approximate fair value due to their short maturities. The carrying amounts of investments approximate fair value based on market quotes.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants. A fair value hierarchy was established which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The fair value hierarchy distinguishes among three levels of inputs that may be utilized when measuring fair value: Level 1 inputs (using quoted prices in active markets for identical assets or liabilities), Level 2 inputs (using external inputs other than level 1 prices such as quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability) and Level 3 inputs (unobservable inputs supported by little or no market activity and based on internal assumptions used to measure assets and liabilities). The classification of each financial asset or liability within the above hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

REVENUE RECOGNITION

Revenue is comprised of mine production revenue, PGM recycling revenue and other sales revenue. Mine production revenue consists of the sales of palladium and platinum extracted by the Company’s mining operations, including any realized hedging gains or losses, and is reduced by sales discounts associated with automotive agreements. Mine production revenue also consists of the sales of by-products (rhodium, gold, silver, copper and nickel) extracted by

88 mining operations. PGM recycling revenue consists of the sales of recycled palladium, platinum and rhodium derived from spent catalytic materials, including any unrealized and realized hedging gains or losses. Other sales revenue consists of sales of PGMs that were acquired on the open market for resale.

Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred either physically or through an irrevocable transfer of metals to customers’ accounts, the price is fixed or determinable, no related obligations remain and collectability is probable. Under the terms of sales contracts and purchase orders received from customers, the Company recognizes revenue when the product is in a refined and saleable form and title passes, which is typically when the product is transferred from the account of the Company to the account of the customer. Under certain of its sales agreements, the Company instructs a third party refiner to transfer metal from the Company’s account to the customer’s account; at this point, the Company’s account at the third party refinery is reduced and the purchaser’s account is increased by the number of ounces of metal sold. These transfers are irrevocable and the Company has no further responsibility for the delivery of the metals. Under other sales agreements, physical conveyance occurs by the Company arranging for shipment of metal from the third party refinery to the purchaser. In these cases, revenue is recognized at the point when title passes contractually to the purchaser. Sales discounts are recognized when the related revenue is recorded. The Company classifies any sales discounts as a reduction in revenue.

HEDGING PROGRAM

From time to time, the Company enters into derivative financial instruments, including fixed forwards, cashless put and call option collars and financially settled forwards to manage the effect of changes in the prices of palladium and platinum on the Company’s revenue and to manage interest rate risk. Derivatives are reported on the balance sheet at fair value and, if the derivative is not designated as a hedging instrument, changes in fair value must be recognized in earnings in the period of change. If the derivative is designated as a hedge, and to the extent such hedge is determined to be highly effective, changes in fair value are either (a) offset by the change in fair value of the hedged asset or liability (if applicable) or (b) reported as a component of other comprehensive income (loss) in the period of change, and subsequently recognized in the determination of net income (loss) in the period the offsetting hedged transaction occurs. If an instrument is settled early, any gains or losses are deferred and recognized as adjustments to the revenue recorded for the related hedged production when the transaction related to the original hedge instrument settles.

Unrealized derivative gains and losses recorded in current and non-current assets and liabilities and amounts recorded in other comprehensive income (loss) and in current period earnings are non-cash items and therefore are taken into account in the preparation of the consolidated statement of cash flows based on their respective balance sheet classifications.

RECLAMATION AND ENVIRONMENTAL COSTS

The fair value of a liability for an asset retirement obligation is recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The fair value of the liability is added to the carrying amount of the associated asset and this additional carrying amount is depreciated over the life of the asset. The liability is accreted at the end of each period through charges to operating expense. If the obligation is settled for other than the carrying amount of the liability, the Company will recognize a gain or loss on settlement.

Accounting for reclamation obligations requires management to make estimates for each mining operation of the future costs the Company will incur to complete final reclamation work required to comply with existing laws and regulations. Actual costs incurred in future periods could differ from amounts estimated. Additionally, future changes to environmental laws and regulations could increase the extent of reclamation and remediation work that the Company is required to perform. Any such increases in future costs could materially impact the amounts charged in future periods to operations for reclamation and remediation.

INCOME TAXES

The Company determines income taxes using the asset and liability approach which results in the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of those assets and liabilities, as well as operating loss and tax credit carryforwards, using enacted tax rates in effect in the years in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets and liabilities are recorded on a jurisdictional basis.

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In assessing the realizability of U.S. deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Each quarter, management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. A valuation allowance has been provided at December 31, 2010 and 2009, for the portion of the Company’s net deferred tax assets for which it is more likely than not that they will not be realized.

STOCK-BASED COMPENSATION

Costs resulting from all share-based payment transactions are recognized in the financial statements over the respective vesting periods and determined using a fair-value-based measurement method. The fair values for stock options and other stock-based compensation awards issued to employees are estimated at the date of grant using a Black- Scholes option pricing model.

EARNINGS (LOSS) PER COMMON SHARE

Basic earnings (loss) per share is computed by dividing net earnings (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share reflect the potential dilution that could occur if the Company’s dilutive outstanding stock options or nonvested shares were exercised and the Company’s convertible debt was converted. No adjustments were made to reported net income (loss) in the computation of basic or diluted earnings (loss) per share as of December 31, 2010, 2009, or 2008. The Company currently has only one class of equity shares outstanding.

COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) includes net income (loss), as well as other changes in stockholders’ equity that result from transactions and events other than those with stockholders. The Company’s only significant elements of other comprehensive income in 2010 and 2009 consisted of unrealized gains and losses related to available-for-sale marketable securities. In 2008, comprehensive income (loss) consisted of unrealized gains and losses on derivative financial instruments related to commodity price hedging activities and available-for-sale marketable securities.

DEBT ISSUANCE COSTS

Costs associated with the issuance of debt are included in other noncurrent assets and are amortized over the term of the related debt using the effective interest method.

USE OF ESTIMATES

The preparation of the Company’s consolidated financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in these consolidated financial statements and accompanying notes. The more significant areas requiring the use of management’s estimates relate to mineral reserves, reclamation and environmental obligations, valuation allowance for deferred tax assets, useful lives utilized for depletion, depreciation, amortization and accretion calculations, future cash flows from long-lived assets, fair value of long-lived assets, and fair value of derivatives. Actual results could differ from these estimates.

FOREIGN CURRENCY TRANSACTIONS

The functional currency of the Company’s Canadian subsidiary is the U.S. dollar. Gains or losses resulting from transactions denominated in Canadian currency are included in net income in the consolidated statements of operations and comprehensive income (loss).

NOTE 3 ACQUISITION

The Company acquired the PGM assets of Marathon PGM Corporation, a Canadian exploration company, on November 30, 2010 for $63.6 million in cash and 3.88 million Stillwater common shares with a fair value of $73.4 million. The principal property acquired is a PGM and copper deposit located near the town of Marathon, Ontario, Canada. The Marathon deposit is currently in the permitting stage and will not be in production for several years.

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The following table summarizes the final allocation of the total consideration paid to the assets acquired at the date of the acquisition:

(In thousands) Total Consideration Cash$ 63,649 Company common stock 73,448 Liabilities assumed 361 Deferred income tax liability 35,969 Total consideration $ 173,427

Allocation of Total Consideration to Assets Acquired Current assets $ 146 Property, plant and equipment Vehicles 39 Land and buildings 593 Mineral properties 172,649 Total assets $ 173,427

NOTE 4 ASSET IMPAIRMENT

The Company determined that there was no material event or change in circumstances requiring the Company to test its long-lived assets for impairment at December 31, 2010 and 2009. The Company recorded a $67.3 million charge against earnings at December 31, 2008, reducing the carrying value of the East Boulder Mine assets to $161.4 million.

Assumptions underlying estimates of future cash flows are subject to risks and uncertainties. Any differences between significant assumptions and market conditions such as PGM prices, lower than expected recoverable ounces, and/or the company’s operating performance could have a material effect on the company’s determination of ore reserves, or its ability to recover the carrying amounts of its long lived assets, resulting in potential additional impairment charges.

NOTE 5 SALES Mine Production

The Company mines and processes ores containing palladium, platinum, rhodium, gold, silver, copper and nickel into intermediate and final products for sale to customers. Palladium, platinum, rhodium, gold and silver are sent to third party refineries for final processing from where they are sold to a number of consumers and dealers with whom the Company has established trading relationships. Refined platinum group metals (PGMs) of 99.95% purity (rhodium of 99.9%) in sponge form are transferred upon sale from the Company’s account at third party refineries to the account of the purchaser. By-product precious metals are normally sold at market prices to customers, brokers or outside refiners. By- products of copper and nickel are produced by the Company at less than commercial grade, so prices for these metals typically reflect a quality discount. By-product sales are included in revenues from mine production. During 2010, 2009 and 2008, total by-product (copper, nickel, gold, silver and mined rhodium) sales were $28.0 million, $23.6 million and $36.8 million, respectively.

Through the end of 2010, the Company was party to a sales agreement with Ford Motor Company (Ford) that in recent years committed 80% of the Company’s mined palladium and 70% of its mined platinum for delivery to Ford. This agreement expired at the end of 2010. The Ford supply agreement included certain price floors and caps designed to limit the parties’ exposure to fluctuations in PGM market prices. Except for ounces priced at the floor or cap, the contract provided that metal deliveries were to be priced at a small discount to the trailing month’s average London price for PGMs.

Effective January 1, 2011, the Company has entered into a three-year supply agreement with General Motors Corporation (GM) that provides for fixed quantities of palladium to be delivered to GM each month. The agreement does not include price floors or caps, but provides for pricing at a small discount to a trailing market price. The Company is

91 continuing to negotiate potential supply arrangements with other large PGM consumers and in the meantime is selling its remaining mine production under month-to-month and spot sales agreements.

PGM Recycling

The Company purchases spent catalyst materials from third parties and processes these materials in its facilities in Columbus, Montana to recover palladium, platinum and rhodium for sale. It also accepts material supplied from third parties on a tolling basis, processing it for a fee and returning the recovered metals to the supplier. The Company has entered into sourcing arrangements for catalyst material with several suppliers. Under these sourcing arrangements as currently structured, the Company in some cases may advance cash against a shipment of material shortly before actually receiving the physical shipment. These advances are included in Other current assets on the Company’s consolidated balance sheet until such time as the material has been physically received and title has transferred to the Company. The Company holds a security interest in materials procured by its largest supplier that have not been received by the Company. Once the material is physically received and title has transferred, the associated advance is reclassified from Other current assets into Inventories. Finance charges collected on advances and inventories prior to being earned are included in Other current liabilities on the Company’s consolidated balance sheet. Finance charges are reclassed from Other current liabilities to Interest income ratably from the time the advance was made until the outturn date of the inventory. The Company recorded write-downs of advances on these recycling inventory purchases of $0.6 million, $0.5 million and $26.0 million during 2010, 2009 and 2008, respectively.

At the same time the Company purchases recycling material it typically enters into a fixed forward contract for future delivery of the PGMs contained in the recycled material at a price consistent with the purchase cost of the recycled material. The contract commits the Company to deliver finished metal on a specified date that normally corresponds to the expected out-turn date for the metal from the final refiner. The purpose of this arrangement is to eliminate the Company’s exposure to fluctuations in market prices during processing, while at the same time creating an obligation for the Company to deliver metal at a future point in time that could be subject to operational risks. If the Company were unable to complete the processing of the recycled material by the contractual delivery date, it could be required to purchase finished metal in the open market to cover its delivery commitments, and then would bear the cost (or benefit) of any change in the market price relative to the price stipulated in the delivery contract.

Other

The Company makes other open market purchases of PGMs from time to time for resale to third parties. The Company recognized revenue of $6.2 million and $20.0 million on 13,000 ounces and 48,800 ounces of palladium that were purchased in the open market and re-sold for the year ended December 31, 2010 and 2008, respectively. The Company purchased in the open market 12,600 ounces of palladium and 2,900 ounces of platinum for the year ended December 31, 2009, recognizing revenue of $5.8 million.

NOTE 6 DERIVATIVE INSTRUMENTS

The Company uses various derivative financial instruments to manage its exposure to changes in interest rates and PGM market commodity prices. Some of these derivative transactions are designated as hedges. Because the Company hedges only with instruments that have a high correlation with the value of the underlying exposures, changes in the derivatives’ fair value are expected to be offset by changes in the value of the hedged transaction.

Commodity Derivatives

The Company customarily enters into fixed forward contracts and on occasion it also enters into financially settled forward contracts to offset the price risk in its PGM recycling activity. From time to time, it also enters into these types of contracts on portions of its mine production. Under these customary fixed forward transactions, the Company agrees to deliver a stated quantity of metal on a specific future date at a price stipulated in advance. The Company uses fixed forward transactions primarily to price in advance the metals acquired for processing in its recycling segment. Under the financially settled forward transactions, at each settlement date the Company receives the difference between the forward price and the market price if the market price is below the forward price and the Company pays the difference between the forward price and the market price if the market price is above the forward price. These financially settled forward contracts are settled in cash at maturity and do not require physical delivery of metal at settlement. The Company will typically use financially settled forward contracts with third parties to reduce its exposure to price risk on metal it is obligated to deliver under long-term sales agreements.

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Mine Production

At present, the Company has not entered into derivative instruments to hedge its mined production. In the second quarter of 2008, the Company settled the remaining financially settled forward agreements covering future anticipated platinum sales out of mine production. Realized losses on hedges of mined platinum in 2008 were $12.8 million and were recorded as an adjustment to mine production revenue.

PGM Recycling

The Company customarily enters into fixed forward sales relating to PGM recycling of catalysts materials. The metals from PGM recycled materials are typically sold forward at the time of purchase and delivered against the fixed forward contracts when the ounces are recovered. All of these fixed forward sales contracts open at December 31, 2010, will settle at various periods through June 2011. The Company has credit agreements with its major trading partners that provide for margin deposits in the event that forward prices for metals exceed the Company’s hedged prices by a predetermined margin limit. As of December 31, 2010 and 2009, no such margin deposits were outstanding or due.

Occasionally the Company also enters into financially settled forward contracts on recycled materials for which it hasn’t entered into a fixed forward sale. Such contracts are utilized when the Company wishes to establish a firm forward price for recycled metal on a specific future date. No financially settled forward contracts were outstanding at December 31, 2010 and 2009. The Company generally has not designated these contracts as cash flow hedges, so they are marked to market at the end of each accounting period. The change in the fair value of the derivatives is reflected in the income statement. The corresponding net realized loss on these derivatives was $0.2 million in 2009 and 2008 and was recorded as a component of recycling revenue. There was no corresponding net realized gain or loss on these derivatives in 2010.

The following is a summary of the Company’s commodity derivatives as of December 31, 2010:

PGM Recycling: Fixed Forwards Platinum Palladium Rhodium Settlement Period Ounces Avg. Price Ounces Avg. Price Ounces Avg. Price First Quarter 2011 13,613 $ 1,697 24,250 $ 642 2,642 $ 2,255 Second Quarter 2011 2,432 $ 1,716 2,553 $ 745 1,274 $ 2,339

The Following is the Effect of Derivative Instruments on the Consolidated Statements of Operations and Comprehensive Income (Loss) for the periods ended December 31, Derivatives Designated as Cash Flow Hedges Effective Portion (In thousands)

Designated Derivative Amount of Gain or (Loss) Recognized in Location of Gain/(Loss) When Amount of Gain or (Loss) Reclassified from AOCI Reclassified AOCI into Income

2010 2009 2008 2010 2009 2008 Financially settled forward contracts $ - $ - $ (6,261) Mine production revenue $ - $ - $ (12,794)

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Ineffective portion of derivatives was not significant at December 31, 2010, 2009, or 2008.

The Following is the Effect of Derivative Instruments on the Consolidated Statements of Operations and Comprehensive Income (Loss) for the periods ended December 31, (In thousands)

Derivatives Not Designated as Cash Location of Gain/(Loss) Amount of Gain or (Loss) Recognized in Income Flow Hedges Recognized in Income

2010 2009 2008

Fixed forward contracts Other revenue $ - $ 5 $ -

Fixed forward contracts Other revenue $ - $ (2) $ - Financially settled forward contracts PGM recycling revenue $ - $ - $ 150

Fixed forward contracts PGM recycling revenue $ - $ 243 $ -

Fixed forward contracts PGM recycling revenue $ - $ (47) $ -

NOTE 7 SHARE-BASED COMPENSATION

STOCK PLANS

The Company sponsors stock option plans (the “Plans”) that enable the Company to grant stock options or nonvested shares to employees and non-employee directors. The Company has options outstanding under three separate plans: the 1994 Incentive Plan, the General Plan and the 2004 Equity Incentive Plan. The 1994 Incentive Plan and the General Plan have been terminated. While no additional options may be issued under the two terminated plans, options issued prior to plan termination remain outstanding. Authorized shares of common stock have been reserved for options that were issued prior to the expiration of the 1994 Incentive Plan and the General Plan. At inception of the three plans, approximately 7.8 million shares of common stock were authorized for issuance under the Plans, including approximately 5.2 million, 1.4 million and 1.2 million shares for the 2004 Equity Incentive Plan, the General Plan and the 1994 Incentive Plan, respectively. Options for approximately 1.5 million shares were available and reserved for grant under the 2004 Equity Incentive Plan as of December 31, 2010.

Awards granted under the Plans may consist of incentive stock options (ISOs) or non-qualified stock options (NQSOs), stock appreciation rights (SARs), nonvested shares or other stock-based awards, with the exception that non- employee directors may not be granted SARs and only employees of the Company may be granted ISOs.

The Compensation Committee of the Company’s Board of Directors administers the Plans and determines the exercise period, vesting period and all other terms of instruments issued under the Plans. Directors’ options vest over a six month period after date of grant. Employees’ options vest ratably over a three year period after date of grant. Officers’ and directors’ options expire ten years after the date of grant. All other options expire five to ten years after the date of grant, depending upon the original grant date. The Company received approximately $0.8 million, $9,200 and $3.0 million, in cash from the exercise of stock options in 2010, 2009 and 2008, respectively.

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Nonvested Shares:

Nonvested shares granted to non-management directors certain members of management and other employees as of December 31, 2010, 2009, and 2008, along with the related compensation expense are detailed in the following table:

Nonvested Market Shares Value on Compensation Expense Grant Date Vesting Date Granted Grant Date 2010 2009 2008 May 3, 2005 May 3, 2008 225,346 $ 1,654,040 $ - $ - $ 147,446 April 27, 2006 April 27, 2009 288,331 $ 4,731,512 - 421,524 1,264,571

February 22, 2007 February 22, 2010 426,514 $ 5,433,788 234,618 (1) 1,407,082 (3) 1,420,002 (4)

February 4, 2008 February 4, 2011 16,741 $ 225,000 81,589 (1) 75,313 68,098

March 6, 2008 March 6, 2011 287,592 $ 5,283,065 1,646,661 (1) 1,701,370 (3) 1,435,344 (4) May 8, 2008 November 8, 2008 19,719 $ 280,010 - - 280,010 December 9,2008 June 9, 2009 12,987 $ 40,000 - 33,333 6,667 January 26, 2009 July 26, 2009 9,852 $ 40,000 - 40,000 -

March 14, 2009 March 14, 2012 642,000 $ 1,964,520 807,708 (1) 523,138 -

April 16, 2009 March 14, 2012 328,819 $ 1,624,366 578,125 (1) 393,973 (3) -

April 16, 2009 March 14, 2010 375,404 $ 1,854,496 369,223 (1) 1,430,977 (3) -

May 7, 2009 November 7, 2009 55,656 $ 320,022 - 320,022 (2) - August 5, 2009 February 5, 2010 5,857 $ 40,000 7,827 32,173 - September 21, 2009 March 21, 2010 5,070 $ 40,000 17,680 22,320 -

February 18, 2010 February 18, 2013 604,775 $ 7,106,106 3,003,183 (1) - -

April 13, 2010 February 12, 2011 17,118 $ 260,536 205,812 (1) - -

April 13, 2010 February 12, 2013 73,535 $ 1,119,203 324,898 (1) - - May 4, 2010 November 4, 2010 27,384 $ 400,080 400,080 - - Total compensation expense of nonvested shares $ 7,677,404 $ 6,401,225 $ 4,622,138

(1) Compensation expense in 2010 was reduced by approximately $97,800 for forfeiture of approximately 16,000 nonvested shares granted in 2010, 2009, 2008 and 2007 to certain members of management and other employees who terminated employment in 2010. Additional compensation expense was recognized in 2010 of $1,492,300 due to immediate vesting of 277,400 nonvested shares granted in 2010, 2009 and 2008 to certain members of management and other employees who terminated employment in 2010.

(2) A total of 13,914 nonvested shares granted on May 7, 2009, to two non-management directors immediately vested during 2009 upon their resignation from the Company’s Board of Directors. Additional compensation expense recognized in 2009 was $16,500.

(3) Compensation expense in 2009 was reduced by approximately $62,500 for forfeiture of approximately 14,100 nonvested shares granted in 2009, 2008 and 2007 to certain members of management and other employees who terminated employment in 2009. Additional compensation expense was recognized in 2009 of $47,300 due to immediate vesting of 19,100 nonvested shares granted in 2009 and 2008 to certain members of management and other employees who terminated employment in 2009.

(4) Compensation expense in 2008 was reduced by approximately $32,400 for forfeiture of approximately 7,600 nonvested shares granted in 2008 and 2007 to certain members of management and other employees who terminated employment in 2008.

Deferral Plans:

The Stillwater Mining Company Non-Employee Directors’ Deferral Plan, allows non-employee directors to defer all or any portion of the compensation received as directors, in accordance with the provisions of Section 409A of the Internal Revenue Code and associated Treasury regulations. All amounts deferred under this plan are fully vested, and each participant elects the deferral period and form of the compensation (cash or Company common stock). The plan provides for a Company matching contribution equal to 20% of the participant’s deferred stock amount. Each participant elects the form of the Company match (cash or Company common stock). Compensation expense that was deferred in common stock related to the Non-Employee Directors’ Deferral Plan was $37,350, $34,900 and $66,550 in 2010, 2009, and 2008, respectively. The Company match was made in Company common stock. In 2010, compensation expense that was deferred in cash related to the Non-Employee Directors’ Deferral Plan was $88,700.

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The Stillwater Mining Company Nonqualified Deferred Compensation Plan, allows officers of the Company to defer up to 60% of their salaries and up to 100% of cash compensation other than salary in accordance with the provisions of Section 409A of the Internal Revenue Code and associated Treasury regulations. All amounts deferred under this plan are fully vested, and each participant elects the deferral period and form of the compensation (cash or Company common stock). For each Plan year, the Company matches the amount of compensation deferred during that year up to a maximum of 6% of the participant’s total compensation for the calendar year. Compensation expense deferred in cash was $226,400, $171,500 and $174,200 in 2010, 2009, and 2008, respectively.

Stock Options:

The Company recognizes compensation expense associated with its stock option grants based on their fair market value on the date of grant using a Black-Scholes option pricing model. Stock option grants to employees generally vest in annual installments over a three year period. The Company recognizes stock option expense ratably over the vesting period of the options. If options are canceled or forfeited prior to vesting, the Company stops recognizing the related expense effective with the date of forfeiture. The compensation expense recorded in general and administrative expense related to the fair value of stock options in 2010, 2009 and 2008 was approximately $0.2 million, $0.2 million and $0.4 million, respectively.

The fair value for options in 2010, 2009 and 2008 was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:

Year ended December 31, 2010 2009 2008

Weighted average expected lives (years) 3.6 3.6 3.8 Interest rate 1.3% 1.9% 2.6% Volatility 67% 67% 58% Dividend yield - - -

Stock option activity for the years ended December 31, 2010, 2009 and 2008, is summarized as follows (excluding the effect of nonvested shares):

Weighted-Average Weighted Average Grant-Date Fair Shares Exercise Price Value Options outstanding at December 31, 2007 1,276,025 $ 20.16 Options exercisable at December 31, 2007 1,149,830 21.11 2008 Activity Options granted 87,100 11.72 $ 5.35 Options exercised (236,690) 12.75 Options canceled/forfeited (96,775) 16.22 Options outstanding at December 31, 2008 1,029,660 $ 21.52 Options exercisable at December 31, 2008 905,266 22.90 2009 Activity Options granted 6,984 7.26 $ 3.58 Options exercised (1,699) 5.41 Options canceled/forfeited (241,887) 23.36 Options outstanding at December 31, 2009 793,058 $ 20.87 Options exercisable at December 31, 2009 742,123 21.56 2010 Activity Options granted 47,892 15.52 $ 7.52 Options exercised (89,971) 9.38 Options canceled/forfeited (139,440) 27.16 Options outstanding at December 31, 2010 611,539 $ 20.70 Options exercisable at December 31, 2010 546,324 21.49

The total intrinsic value of stock options exercised during the years ended December 31, 2010, 2009 and 2008 was $0.6 million, $6,000 and $1.8 million, respectively. At December 31, 2010, the total intrinsic value was $2.4 million and $1.9 million for stock options outstanding and exercisable, respectively.

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The following table summarizes information for outstanding and exercisable options as of December 31, 2010:

Options Outstanding Options Exercisable Average Weighted Weighted Range of Number Remaining Average Number Average Exercise Price Outstanding Contract Life Exercise Price Exercisable Exercise Price $ 2.53 -$ 4.66 6,527 4.2$ 3.17 4,834$ 2.76 $ 4.67 -$ 9.33 44,309 4.9$ 6.76 36,016$ 6.69 $ 9.34 -$ 13.99 64,327 6.2$ 11.96 40,675$ 12.02 $ 14.00 -$ 18.65 88,442 3.9$ 15.67 74,690$ 15.56 $ 18.66 -$ 23.31 261,834 1.7$ 19.33 244,009$ 19.31 $ 23.32 -$ 27.98 10,875 0.6$ 26.18 10,875$ 26.18 $ 27.99 -$ 32.64 2,025 0.6$ 28.68 2,025$ 28.68 $ 32.65 -$ 37.30 91,200 0.2$ 34.74 91,200$ 34.74 $ 37.31 -$ 38.76 42,000 0.1$ 38.35 42,000$ 38.35 611,539 2.4$ 20.70 546,324$ 21.49

A summary of the status of the Company’s nonvested stock options as of December 31, 2010, and changes during the year then ended, is presented below:

Weighted-Average Nonvested Options Options Grant-Date Fair Value

Nonvested options at January 1, 2010 51,035 $ 4.96 Options granted 47,892 7.52 Options vested (29,584) 5.19 Options forfeited (4,128) 4.28 Nonvested options at December 31, 2010 65,215 $ 6.77

Total compensation cost related to nonvested stock options not yet recognized is $181,400, $72,800 and $23,800 for 2011, 2012 and 2013, respectively.

Employee Benefit Plans:

The Company has adopted two savings plans, which qualify under section 401(k) of the U.S. Internal Revenue Code, covering essentially all non-bargaining and bargaining employees. Employees may elect to contribute up to 60% of eligible compensation, subject to the Employee Retirement Income Security Act of 1974 (ERISA) limitations. The Company is required to make matching contributions equal to 100% of the employee’s contribution up to 6% of the employee’s compensation. Matching contributions are made with common stock of the Company. During 2010, 2009 and 2008, the Company issued approximately 0.3 million, 0.9 million and 0.8 million shares of common stock, respectively, with a market value on the respective grant dates of $4.4 million, $4.8 million and $6.0 million, respectively, to match employees’ contributions. The Company made no cash contributions to the plans in 2010, 2009 or 2008.

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NOTE 8 INCOME TAXES

The components of the Company’s deferred tax liabilities (assets) are comprised of the following temporary differences and carry forwards at December 31, 2010 and 2009:

December 31, (In thousands) 2010 2009 Mine development costs-US$ 83,898 $ 80,369 Mine development costs-Canada 35,969 - Inventory - 16 Total deferred tax liabilities 119,867 80,385 Noncurrent liabilities (10,984) (9,262) Property and equipment (29,673) (29,349) Current liabilities (17,217) (18,145) Long-term investments (1,376) (1,376) Inventory (548) Recycling inventory adjustment (125) - Net operating loss and other carryforwards (120,236) (135,271) Total deferred tax assets (180,159) (193,403) Valuation allowance 96,261 113,018 Net deferred tax assets (83,898) (80,385) Net deferred tax liabilities$ 35,969 $ -

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. The Company provided a valuation allowance in 2010 and 2009 to reflect the estimated amount of deferred tax assets which may not be realized principally due to the expiration of the net operating loss carry forwards (NOL’s) as management considers it more likely than not that the NOL’s will not be realized based upon projected future taxable income.

Reconcilement of the federal income tax provision at the applicable statutory income tax rate to the effective rate is as follows:

Year ended December 31, (In thousands) 2010 2009 2008

Income (loss) before income taxes $ 50,365 $ (8,655) $ (115,797) Income tax (benefit) or expense at statutory rate of 35% $ 17,642 $ (3,237) $ (40,941) State income tax benefit, net of federal benefit 2,212 (406) (5,132) Change in valuation allowance (16,757) (1,931) 46,347 Other (3,097) 5,544 (306) Net income tax benefit $ - $ (30) $ (32)

At December 31, 2010, the Company had approximately $324 million of regular tax net operating loss carry forwards expiring during 2010 through 2029. Usage of $193 million of these net operating losses is limited to approximately $9.5 million annually as a result of the change in control of the Company that occurred in connection with the Norilsk Nickel transaction in 2003. Usage of $131 million of these net operating losses is limited to approximately $79 million annually as a result of the exit of Norilsk Nickel in 2010.

The Company recorded a tax benefit of $30,000 in 2009, related to a refundable minimum tax credit. No cash payments for income taxes related to state tax payments were made in 2010, 2009, or 2008.

The Company had no unrecognized tax benefits at December 31, 2010 or 2009. The Company’s policy is to recognize interest and penalties on unrecognized tax benefits in Income tax provision in the Consolidated Statements of Operations and Comprehensive Income (Loss). There was no interest or penalties for the year ended December 31, 2010. The tax years subject to examination by the taxing authorities are the years ending December 31, 2009, 2008 and 2007.

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NOTE 9 COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) consists of earnings items and other gains and losses affecting stockholders’ equity that are excluded from current net income (loss). As of December 31, 2010 and 2009, such items consisted of unrealized losses on available-for-sale marketable securities. In 2008, comprehensive income (loss) consisted of unrealized gains and losses on derivative financial instruments related to commodity price hedging activities and available-for-sale marketable securities.

The following summary sets forth the changes in Accumulated other comprehensive income (loss) during 2010, 2009 and 2008:

Accumulated Available for Other Sale Commodity Comprehensive (In thousands) Securities Instruments Loss Balance at December 31, 2007 $ 508 $ (6,533) $ (6,025)

Reclassification to earnings 6 12,794 12,800 Change in value (674) (6,261) (6,935) Comprehensive income (loss) $ (668) $ 6,533 $ 5,865

Balance at December 31, 2008 $ (160) $ - $ (160)

Reclassification to earnings - - - Change in value 70 - 70 Comprehensive income (loss) $ 70 $ - $ 70

Balance at December 31, 2009$ (90) $ - $ (90)

Reclassification to earnings - - - Change in value (762) - (762) Comprehensive income (loss) $ (762) $ - $ (762)

Balance at December 31, 2010$ (852) $ - $ (852)

NOTE 10 SEGMENT INFORMATION

The Company operates two reportable business segments: Mine Production and PGM Recycling. These segments are managed separately based on fundamental differences in their operations.

The Mine Production segment consists of two business components: the Stillwater Mine and the East Boulder Mine. The Mine Production segment is engaged in the development, extraction, processing and refining of PGMs. The Company sells PGMs from mine production under long-term sales agreements, through derivative financial instruments and in open PGM markets. The financial results of the Stillwater Mine and the East Boulder Mine have been aggregated, as both have similar products, processes, customers, distribution methods and economic characteristics.

The PGM Recycling segment is engaged in the recycling of spent catalyst material to recover the PGMs contained in the material. The Company allocates costs of the smelter and base metal refinery to both the Mine Production segment and to the PGM Recycling segment for internal and segment reporting purposes because the Company’s smelting and refining facilities support the PGM extraction of both business segments.

The Company purchased the PGM assets of Marathon PGM Corporation, of which the majority represents mineral properties. The principal property acquired is a large PGM and copper deposit located near the town of Marathon, Ontario, Canada. The Marathon deposit is currently in the permitting stage and will not be in production for several years. Financial information available for this segment of the Company as of December 31, 2010, consists of total asset values and limited capital expenditures as the properties are developed.

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The All Other group primarily consists of assets, revenues, and expenses of various corporate and support functions.

The Company evaluates performance and allocates resources based on income or loss before income taxes. The following financial information relates to the Company’s business segments:

(In thousands) Mine PGM Marathon All Year ended December 31, 2010 Production Recycling Properties Other Total Revenues$ 381,044 $ 168,612 $ - $ 6,222 $ 555,878 Depletion, depreciation and amortization$ 71,121 $ 472 $ - $ - $ 71,593 Interest income$ - $ 1,240 $ - $ 904 $ 2,144 Interest expense$ - $ - $ - $ 6,536 $ 6,536 Income (loss) before income tax benefit (provision)$ 80,072 $ 11,475 $ (40) $ (41,142) $ 50,365 Capital expenditures$ 44,703 $ 5,022 $ 46 $ 492 $ 50,263 Total assets$ 384,377 $ 51,223 $ 182,080 $ 291,790 $ 909,470

(In thousands) Mine PGM Marathon All Year ended December 31, 2009 Production Recycling Properties Other Total Revenues$ 306,892 $ 81,788 $ - $ 5,752 $ 394,432 Depletion, depreciation and amortization$ 70,239 $ 178 $ - $ - $ 70,417 Interest income$ - $ 786 $ - $ 1,060 $ 1,846 Interest expense$ - $ - $ - $ 6,801 $ 6,801 Income (loss) before induced conversion loss$ 26,873 $ 6,473 $ - $ (33,934) $ (588) Induced conversion loss$ - $ - $ - $ 8,097 $ 8,097 Income (loss) before income tax benefit (provision)$ 26,873 $ 6,473 $ - $ (42,031) $ (8,685) Capital expenditures$ 38,520 $ 911 $ - $ 103 $ 39,534 Total assets$ 408,146 $ 31,283 $ - $ 285,766 $ 725,195

(In thousands) Mine PGM Marathon All Year ended December 31, 2008 Production Recycling Properties Other Total Revenues$ 360,364 $ 475,388 $ - $ 19,980 $ 855,732 Depletion, depreciation and amortization$ 82,792 $ 192 $ - $ - $ 82,984 Interest income$ - $ 6,979 $ - $ 4,124 $ 11,103 Interest expense$ - $ 1 $ - $ 9,717 $ 9,718 Income (loss) before impairment charge$ (6,413) $ 33,817 $ - $ (43,196) $ (15,792) Impairment charge$ 67,254 $ 25,999 $ - $ 6,784 $ 100,037 Income (loss) before income tax benefit (provision)$ (73,667) $ 7,818 $ - $ (49,980) $ (115,829) Capital expenditures$ 81,657 $ 306 $ - $ 314 $ 82,277 Total assets$ 448,312 $ 23,184 $ - $ 251,393 $ 722,889

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NOTE 11 INVESTMENTS

The cost, gross unrealized gains, gross unrealized losses, and fair market value of available-for-sale investment securities by major security type and class of security at December 31, are as follows:

Gross Gross unrealized unrealized Fair (In thousands) Costgains losses market value 2010 Federal agency notes$ 147,925 $ - $ (316) $ 147,609 Commercial paper 42,036 - (657) 41,379 Mutual funds 971 121 - 1,092 Total$ 190,932 $ 121 $ (973) $ 190,080 2009 Federal agency notes$ 28,102 $ - $ (54) $ 28,048 Commercial paper 6,500 - (33) 6,467 Mutual funds 752 - (3) 749 Total$ 35,354 $ - $ (90) $ 35,264

The mutual funds included in the investment table above are included in Other noncurrent assets on the consolidated balance sheet.

NOTE 12 INVENTORIES

For purposes of inventory accounting, the market value of inventory is generally deemed equal to the Company’s current cost of replacing the inventory, provided that: (1) the market value of the inventory may not exceed the estimated selling price of such inventory in the ordinary course of business less reasonably predictable costs of completion and disposal, and (2) the market value may not be less than net realizable value reduced by an allowance for a normal profit margin. In order to reflect inventory costs in excess of market values, the Company, during 2009 and 2008, reduced the aggregate inventory carrying value of certain components of its in-process and finished goods inventories by $6.6 million and $8.9 million, respectively. No reduction to inventory value was necessary during 2010.

The costs of PGM inventories as of any date are determined based on combined production costs per ounce and include all inventoriable production costs, including direct labor, direct materials, depreciation and amortization and other overhead costs relating to mining and processing activities incurred as of such date.

Inventories reflected in the accompanying balance sheets at December 31, consisted of the following:

(In thousands) 2010 2009 Metals inventory Raw ore $ 943 $ 1,163 Concentrate and in-process 40,818 23,985 Finished goods 42,236 45,537 83,997 70,685 Materials and supplies 17,809 18,282 Total inventory $ 101,806 $ 88,967

The Company also holds in its possession, materials it processes on a toll basis for customers until the tolled material is transported to a third party refiner.

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NOTE 13 EARNINGS (LOSS) PER COMMON SHARE

A total of 53,013 stock option weighted average shares of common stock were included in the computation of diluted earnings (loss) per share for 2010. Outstanding options to purchase 439,440 weighted shares of common stock were excluded from the computation of diluted earnings (loss) per share for 2010, because the market price at the end of the period was lower than the exercise price, and therefore the effect would have been antidilutive. Outstanding options to purchase 760,619 and 888,879 weighted average shares were excluded from the computation of diluted earnings (loss) per share in 2009 and 2008 respectively, because the Company reported losses in both years and so the effect would have been antidilutive and inclusion of these options would have reduced the net loss per share.

The effect of outstanding nonvested shares was to increase diluted weighted average shares outstanding by 1,189,253 shares for 2010. There was no effect of outstanding nonvested shares on diluted weighted average shares outstanding in 2009 or 2008 because the Company reported net losses in both years and inclusion of any of these shares would have reduced the net loss per share amounts.

All shares of common stock applicable to the outstanding convertible debentures were excluded from the computation of diluted weighted average shares in 2010, 2009 and 2008 because the net effect of assuming all the debentures were converted would have been antidilutive.

NOTE 14 DEBT OBLIGATIONS

Convertible Debentures

On March 12, 2008, the Company issued and sold $181.5 million aggregate principal amount of senior convertible debentures due March 15, 2028 (debentures). The debentures pay interest at 1.875% per annum, payable semi-annually on March 15 and September 15 of each year, and commenced on September 15, 2008. The debentures will mature on March 15, 2028, subject to earlier repurchase or conversion. Each $1,000 principal amount of debentures is initially convertible, at the option of the holders, into approximately 42.5351 shares of the Company’s common stock, at any time prior to the maturity date. The conversion rate is subject to certain adjustments, but will not be adjusted for accrued interest or any unpaid interest. The conversion rate initially represents a conversion price of $23.51 per share. Holders of the debentures may require the Company to repurchase all or a portion of their debentures on March 15, 2013, March 15, 2018 and March 15, 2023, or at any time before March 15, 2028 upon the occurrence of certain events including a change in control. The Company may redeem the debentures for cash beginning on or after March 22, 2013.

After issuance of the debentures, the Company used a portion of the proceeds to repay its term loan facility and revolving credit facility. The term loan facility and the revolving credit facility were fully repaid and terminated in March 2008. Interest expense for 2008 included approximately $2.2 million for the write-off of unamortized fees associated with the termination of the credit facility. Amortization expense related to the issuance costs of the debentures was $0.9 million, $1.0 million and $0.8 million in 2010, 2009 and 2008, respectively, and the interest expense on the debentures was $3.1 million, $3.3 million and $2.7 million in 2010, 2009 and 2008, respectively. The Company made cash payments of $3.1 million, $3.4 million and $1.7 million for interest on the debentures during 2010, 2009 and 2008, respectively.

In October 2009, the Company undertook the exchange of $15.0 million face amount of the convertible debentures for 1.84 million shares of the Company’s common stock. The debentures so acquired were retired, leaving $166.5 million face value of the debentures outstanding at December 31, 2009. Because the number of shares issued in the transaction exceeded the 42.5351 shares per $1,000 of face value specified in the bond indenture, the Company expensed the value of the additional shares as an “inducement loss.” Consequently, the Company recorded a loss on the exchange transaction of $8.1 million in 2009.

The Indenture for the convertible debentures defines a “change of control” in part as a change in which “any ‘person’ or ‘group’ other than [Norilsk Nickel and its affiliates] is or becomes the direct or indirect beneficial owner of shares of Voting Stock representing 50% or more of the total voting power of all outstanding classes of the Company’s Voting Stock or has the power, directly or indirectly, to elect a majority of the members of the Board of Directors.” The exit of Norilsk Nickel as the Company’s majority shareholder in late 2010 was accomplished through a widely distributed secondary offering to the market that did not result in any single shareholder or affiliated group of shareholders controlling 50% or more of the Company’s shares or having the power to elect a majority of the Board. Consequently, the transaction did not constitute a change of control under the Indenture.

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EXEMPT FACILITY REVENUE BONDS

During 2000, the Company completed a $30 million offering of Exempt Facility Revenue Bonds, Series 2000, through the State of Montana Board of Investments. The bonds were issued by the State of Montana Board of Investments to finance a portion of the costs of constructing and equipping certain sewage and solid waste disposal facilities at both the Stillwater Mine and the East Boulder Mine. The bonds mature on July 1, 2020, and have a stated interest rate of 8.00% with interest paid semi-annually. The bonds have an effective interest rate of 8.57%. Net proceeds from the offering were $28.7 million. The balance outstanding for both years ended December 31, 2010 and 2009 was $29.5 million, which is net of unamortized discount of $0.5 million. The Company made cash payments of $2.4 million for interest on the revenue bonds during 2010, 2009 and 2008.

NOTE 15 PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at December 31, consisted of the following:

(In thousands) 2010 2009

Machinery and equipment $ 55,722 $ 52,724 Buildings and structural components 139,533 132,007 Mine development 624,944 429,416 Land 8,091 7,069 Construction-in-progress: Stillwater Mine 49,796 40,332 East Boulder Mine 7,096 6,776 Other 2,995 1,991 888,177 670,315 Less accumulated depreciation and amortization (378,390) (311,449) Total property, plant, and equipment $ 509,787 $ 358,866

The Company’s capital expenditures for the years ended December 31, were as follows:

(In thousands) 2010 2009 2008

Stillwater Mine$ 34,093 $ 26,682 $ 46,513 East Boulder Mine 6,513 4,447 19,097 Other 9,657 8,405 16,667 Total capital expenditures$ 50,263 $ 39,534 $ 82,277

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NOTE 16 ASSET RETIREMENT OBLIGATION

The following summary sets forth the annual changes to the Company’s asset retirement obligation in 2010, 2009 and 2008: Stillwater East Boulder (In thousands) Mine Mine Total Balance at December 31, 2007 $ 7,550 $ 2,956 $ 10,506 Liabilities incurred - - - Accretion expense 644 241 885 Revision of estimated cash flows (2,301) (2,062) (4,363) Balance at December 31, 2008 $ 5,893 $ 1,135 $ 7,028 Liabilities incurred - - - Accretion expense 507 99 606 Revision of estimated cash flows (645) (780) (1,425) Balance at December 31, 2009 $ 5,755 $ 454 $ 6,209 Liabilities incurred - - - Accretion expense 498 40 538 Revision of estimated cash flows - - - Balance at December 31, 2010 $ 6,253 $ 494 $ 6,747

No adjustments were made to the asset retirement obligations in 2010. Revisions during 2009 and 2008 resulted from changes in estimated timing of abandonment. In 2009, the Company increased the estimated mine life of the Stillwater Mine from the year 2030 to 2032; and it increased the estimated mine life of the East Boulder Mine from the year 2055 to 2074. In 2008, the Company increased the estimated mine life of the Stillwater Mine five years; and it increased the estimated mine life of the East Boulder Mine by 15 years.

At December 31, 2010, the Company had posted surety bonds with the State of Montana in the amount of $25.8 million, and had obtained a letter of credit of $7.5 million to satisfy the current $33.3 million of financial guarantee requirements determined by the regulatory agencies. The Company anticipates these financial guarantee requirements may increase once the state finalizes its environmental impact statement which was completed in 2008. However, the Company to date has not received a final environmental impact statement from the state.

NOTE 17 FAIR VALUE MEASUREMENTS

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. This hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The classification of each financial asset or liability within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The three levels of inputs used to measure fair value are as follows:

• Level 1 - Quoted prices in active markets for identical assets or liabilities.

• Level 2 - Observable inputs other than quoted prices included in Level 1 such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or inputs that are observable or can be corroborated by observable market data. • Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

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Financial assets and liabilities measured at fair value on a recurring basis at December 31, 2010 and 2009 consisted of the following:

(In thousands) Fair Value Measurements

At December 31, 2010 Total Level 1 Level 2 Level 3 Mutual funds$ 1,092 $ 1,092 $ - $ - Investments$ 188,988 $ 188,988 $ - $ -

(In thousands) Fair Value Measurements

At December 31, 2009 Total Level 1 Level 2 Level 3 Mutual funds$ 749 $ 749 $ - $ - Investments$ 34,515 $ 34,515 $ - $ -

The fair value of mutual funds and investments is based on market prices which are readily available. Unrealized gains or losses on mutual funds and investments are recorded in Accumulated other comprehensive income (loss).

Financial assets and liabilities measured at fair value on a nonrecurring basis at December 31, 2010 and 2009 consisted of the following:

(In thousands) Fair Value Measurements

At December 31, 2010 Total Level 1 Level 2 Level 3 Convertible debentures$ 193,973 $ - $ 193,973 $ - Exempt facility revenue bonds$ 26,903 $ - $ - $ 26,903

(In thousands) Fair Value Measurements

At December 31, 2009 Total Level 1 Level 2 Level 3 Convertible debentures$ 139,028 $ - $ 139,028 $ - Exempt facility revenue bonds$ 25,619 $ - $ - $ 25,619

The Company used implicit interest rates of comparable unsecured obligations to calculate the fair value of the Company’s $30 million 8% Series 2000 exempt facility industrial revenue bonds at December 31, 2010 and 2009. The Company used its current trading data to determine the fair value of the Company’s $166.5 million 1.875% convertible debentures at December 31, 2010 and 2009.

NOTE 18 RELATED PARTIES

The Palladium Alliance International (PAI) promotes palladium in the worldwide jewelry market. Currently, the PAI receives a significant portion of its funding from the Company. In 2010, 2009 and 2008, the Company made contributions of $2.1 million, $1.7 million and $5.2 million, respectively, to PAI. These contributions are accounted for in marketing expense.

NOTE 19 COMMITMENTS AND CONTINGENCIES

The Company manages risk through insurance coverage, credit monitoring and diversification of suppliers and customers.

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REFINING AGREEMENTS The Company has contracted with two entities to refine its filter cake production. Even though there are a limited number of PGM refiners, the Company believes that it is not economically dependent upon any one refiner.

OPERATING LEASES

The Company has operating leases for various mining equipment, office equipment and office space expiring at various dates through December 31, 2014. Total rental expense for cancelable and non-cancelable operating leases was $1.3 million, $1.5 million and $1.8 million in 2010, 2009 and 2008, respectively.

Future minimum lease payments for operating leases with terms in excess of one year are as follows:

Minimum Lease Year ended (In thousands) Payment 2011 $ 318 2012 297 2013 264 2014 233 Total $ 1,112

SIGNIFICANT CUSTOMERS

Total sales to significant customers as a percentage of total revenues for the years ended December 31 were as follows:

2010 2009 2008 Customer A 49% 53% 30% Customer B 17% 21% 25% Customer C * * 13% Customer D * * 11% Customer E 12% * * 78% 74% 79%

* Represents less than 10% of total revenues

LABOR UNION CONTRACTS

As of December 31, 2010, the Company had approximately 62% and 17% of its active labor force covered by collective bargaining agreements expiring on July 1, 2011 and July 1, 2012, respectively.

LEGAL PROCEEDINGS

The Company is involved in various claims and legal actions arising in the ordinary course of business, primarily employee lawsuits. In the opinion of management, the ultimate disposition of these matters is not expected to have a material adverse effect on the Company’s consolidated financial position, results of operations or liquidity.

REGULATIONS AND COMPLIANCE

At December 31, 2010, the Company believes all underground operations are in compliance with Mine Safety and Health Administration (MSHA) limits on diesel particulate matter (DPM) exposure for underground miners through the use of blended bio-diesel fuels, post exhaust treatments, power train advances and high secondary ventilation standards. No assurance can be given that any lack of compliance will not impact the Company in the future.

Nitrogen concentrates in groundwater have been elevated above background levels at both the Stillwater Mine and the East Boulder Mine as a result of operational activities and discharges currently authorized under permit. Noncompliance with standards have occurred in some instances and are being addressed by the Company through action

106 plans approved by the appropriate federal and state regulatory agencies. Additionally, an Administrative Order on Consent (AOC) has been approved in response to exceedances at the East Boulder Mine which modifies enforcement limits and provides for Agency approval of remedial actions under the compliance plan. In view of its efforts to comply and progress to date in implementing remedial and advanced treatment technologies, the Company does not believe that failure to be in strict compliance will have a material adverse effect on the Company’s financial position, results of operations and cash flows.

GUARANTEES AND INDEMNITIES

On December 13, 2010, MMC Norilsk Nickel, the Company’s largest shareholder, announced that it had completed a sale to the public of the entire 49.8 million shares of the Company’s common stock owned by its wholly owned subsidiary, Norimet Limited. However, prior to the closing of the sale transaction, Norimet Limited advised that it was unable to deliver the share certificates to the transfer agent. Notably, most of these share certificates include a prominent legend indicating that the shares are subject to a stockholders agreement, which contains restrictions on transfer. As is customary when securities are undeliverable, before proceeding, the transfer agent required indemnification for its exposure to any consequent legal damage claims prior to the issuance of replacement shares. In order to allow the transaction to close, the Company and certain Norilsk Nickel affiliates agreed to indemnify and hold harmless the transfer agent. Simultaneously, the Company became the beneficiary of an Indemnification Agreement executed by certain affiliates of Norilsk Nickel, whereby the entire net proceeds of the offerings received by Norilsk Nickel and its affiliates were deposited into a restricted account and cannot be released without the Company’s consent. The Company is not required to consent to the release of these funds until certain specified conditions are satisfied.

If Norilsk is not able to obtain surety commitments for the unlocated certificates and certain other alternative requirements are not satisfied, Norilsk Nickel or its affiliates will be obligated to make certain payments to the Company.

The maximum potential exposure to losses that the Company could suffer relating to the unlocated certificates cannot be estimated, but presumably such amount would correlate to the value of the shares represented by the unlocated certificates at some unknown date. The Company believes that the probability of it incurring an unrecoverable loss related to the unlocated certificates is remote, given that the entire net proceeds of the offerings remain in a restricted account and cannot be released without the Company’s consent, and the fair value of the exposure, is therefore believed to be immaterial.

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NOTE 20 QUARTERLY DATA (UNAUDITED)

Quarterly earnings data for the years ended December 31, 2010 and 2009 were as follows:

(In thousands, except per share data) 2010 Quarter Ended March 31 June 30 September 30 December 31 Revenue $ 133,471 $ 134,861 $ 142,872 $ 144,674 Depletion, depreciation and amortization $ 18,501 $ 16,628 $ 18,080 $ 18,384 Operating income (loss) $ 14,818 $ 15,930 $ 6,428 $ 17,536 Net income (loss) $ 13,359 $ 14,590 $ 5,883 $ 16,533 Comprehensive income (loss) $ 13,165 $ 14,606 $ 5,683 $ 16,149 Basic earnings (loss) per share $ 0.14 $ 0.15 $ 0.06 $ 0.17 Diluted earnings (loss) per share $ 0.14 $ 0.15 $ 0.06 $ 0.16 2009 Quarter Ended March 31 June 30 September 30 December 31 Revenue $ 85,818 $ 94,787 $ 112,004 $ 101,823 Depletion, depreciation and amortization $ 17,165 $ 17,087 $ 18,549 $ 17,616 Operating income (loss) $ (10,609) $ 5,815 $ 5,525 $ 3,557 Net income (loss) $ (11,680) $ 4,562 $ 4,214 $ (5,751) Comprehensive income (loss) $ (11,714) $ 4,643 $ 4,306 $ (5,820) Basic earnings (loss) per share $ (0.12) $ 0.05 $ 0.04 $ (0.06) Diluted earnings (loss) per share $ (0.12) $ 0.05 $ 0.04 $ (0.06)

ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not Applicable ITEM 9A CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures.

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), as of the end of the period covered by this report. Based on such evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act.

(b) Changes in Internal Control Over Financial Reporting.

In evaluating the registrant’s internal control over financial reporting, as required by Rules 13a-15(d) and 15d- 15(d) of the Exchange Act, for the quarter ended December 31, 2010, management determined that during the fourth quarter of 2009 there were no changes to the registrant’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

(c) Internal Control Over Financial Reporting. The Company, under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of its internal control over financial

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reporting as of December 31, 2010, and has concluded that, as December 31, 2010, the Company’s internal control over financial reporting was effective. The Company’s independent registered public accounting firm has issued an audit opinion on the effectiveness of the Company’s internal control over financial reporting. This report appears within Item 8 of this Annual Report on Form 10-K. Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based upon the framework in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, our management concluded that our internal control over financial reporting is effective, as of December 31, 2010.

PART III

ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

With regard to directors and corporate governance, reference is made to the information set forth under the caption “Nominees for Election” in the Company’s Proxy Statement for the 2011 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A, which information is incorporated herein by reference.

Set forth below is certain information concerning the individuals who were executive officers of the Company as of December 31, 2010.

Name Age Position Francis R. McAllister 68 Chairman of the Board and Chief Executive Officer John R. Stark 58 Executive Vice President, Chief Commercial Officer Gregory A Wing 61 Vice President and Chief Financial Officer Terrell I. Ackerman 57 Vice President, General Manager East Boulder Operations Kevin Shiell 53 Vice President, General Manager Stillwater Mine Operations

The following are brief biographies of the Company’s executive officers:

EXECUTIVE OFFICERS

Francis R. McAllister (age 68) was appointed Chairman of the Board and Chief Executive Officer of the Company effective February 12, 2001. Mr. McAllister was appointed a Director of the Company on January 9, 2001. Prior to his appointment to the Board, Mr. McAllister served with ASARCO Incorporated from 1966 to 1999, most recently as Chairman and Chief Executive Officer in 1999, as Chief Operating Officer from 1998 to 1999, as Executive Vice President — Copper Operations from 1993 to 1998, as Chief Financial Officer from 1982 to 1993 and in various professional and management positions from 1966 to 1982. He currently serves on the Board of Directors of Cliffs Natural Resources Incorporated, an iron ore mining Company. Mr. McAllister received his MBA from New York University, his Bachelor of Science - Finance from the University of Utah, and attended the Advanced Management Program at Harvard Business School.

John R. Stark (age 58) was appointed Vice President, Human Resources on September 21, 1999, and was subsequently appointed Secretary and Corporate Counsel on May 29, 2001 and July 17, 2001, respectively. In 2003, Mr. Stark assumed the duties and responsibilities of the Chief Commercial Officer (including oversight of the recycling segment). Mr. Stark has a varied background in corporate administration and human resources. He was previously with Molycorp, Inc. in 1996 as Manager of Sales and Administration; Western Mobile, Inc., an international construction material supplier, from 1992 to 1996; and with AMAX Inc. for 13 years until 1992. Mr. Stark received his Juris Doctor degree from the University of Denver School of Law and holds a Bachelor of Arts degree in economics from the University of Montana.

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Gregory A. Wing (age 61) became the Company’s Vice President and Chief Financial Officer effective March 22, 2004. Previously, Mr. Wing served as the Vice President and Chief Financial Officer of Black Beauty Coal Company from 1995 through 2003. Prior to joining Black Beauty, Mr. Wing was with The Pittsburg and Midway Coal Mining Company, a subsidiary of Chevron Corporation, as Manager of Financial Planning and Analysis. From 1986 to 1989, he was employed by Chevron Corporation as Senior Analyst in Corporation Planning, and from 1980 to 1986, he was with Arabian American Oil Company in Dhahran, Saudi Arabia. Mr. Wing received a Bachelor of Arts in Physics and an M.B.A in Accounting and Finance, both from the University of California at Berkeley.

Terrell I. Ackerman (age 57) is currently Vice President, General Manager – East Boulder Mine Operations. Mr. Ackerman joined the Company in March 2000 as Director of Corporate Planning after 2 years as an independent consultant. During 1998 and 1999, Mr. Ackerman conducted feasibility studies, operational and mine planning reviews for various underground operations. Prior to this time, Mr. Ackerman was VP and General Manager of BHP Copper’s San Manuel Operation in Arizona. Mr. Ackerman held increasing roles of accountability for Magma Copper Company starting as an underground engineer in training in 1976. Mr. Ackerman received a Bachelor of Science degree in Mine Engineering from the University of Idaho College of Mines.

Kevin G. Shiell (age 53) was elected Vice President of the Company on May 4, 2010. Mr. Shiell has over 32 years of underground mining experience. Mr. Shiell has served as General Manager of the Stillwater mine and operations since 2009. During 2006 to 2008 he was General Manager at the East Boulder Mine. Prior to joining Stillwater in 1999, Mr. Shiell was Mine Superintendent with Dynatec Corporation. Mr. Shiell was with Addwest Minerals as Mine Superintendent and Echo Bay Minerals as Manager of Operations. From 1979 to 1995, Mr. Shiell was with Hecla Mining Company where he held various positions including miner, supervisor, trainer, planner, as well as mine and safety foreman. And from 1978 to 1979, Mr. Shiell was with Day Mines and United Nuclear homestake operations. Mr. Shiell is a member of Northwest Mining Association.

For information concerning the Company’s executive officers, reference is made to the information set forth under the caption “Section 16(a) Beneficial Ownership Compliance” in the Company’s Proxy Statement for the 2010 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A, which information is incorporated herein by reference.

Audit Committee Financial Expert

Federal regulations and New York Stock Exchange listing requirements require the board to determine if a member of its audit committee is an "audit committee financial expert." According to these requirements, an audit committee member can be designated an audit committee financial expert only when the audit committee member satisfies five specified qualification requirements, such as experience (or "experience actively supervising" others engaged in) preparing, auditing, analyzing, or evaluating financial statements presenting a level of accounting complexity comparable to what is encountered in connection with the Company's financial statements. The regulations further require such qualifications to have been acquired through specified means of experience or education. The Board has designated Michael S. Parrett as an Audit Committee financial expert. Mr. Parrett meets the independence standards for audit committee members under the NYSE Listed Company and SEC rules.

Code of Ethics

The Company’s code of ethics requires honest and ethical conduct; avoidance of conflicts of interest; compliance with applicable governmental laws, rules and regulations; full, fair, accurate, timely, and understandable disclosure in reports and documents filed with the SEC and in other public communications made; and accountability for adherence to the code. The code of ethics can be accessed via the Company’s internet website at http://www.stillwatermining.com. Printed copies will be provided upon request.

Corporate Governance

The Company’s corporate governance principles, corporate governance and nominating committee charter, compensation committee charter and audit committee charter can be accessed via the Company’s internet website at http://www.stillwatermining.com

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NYSE CEO Certification

Pursuant to Section 303A.12(a) of the NYSE Listed Company Manual, the Company's chief executive officer submitted a certification, dated June 1, 2010, that to his knowledge, as of such date, the Company was not in violation of any NYSE listing standards.

ITEM 11 EXECUTIVE COMPENSATION

Reference is made to the information set forth under the caption “Executive Compensation” in the Company’s Proxy Statement for the 2011 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A, which information is incorporated herein by reference.

ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS MATTERS

Reference is made to the information set forth under the caption “Security Ownership of Principal Stockholders and Management” in the Company’s Proxy Statement for the 2011 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A, which information is incorporated herein by reference.

ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Reference is made to the information set forth under the caption “Certain Relationships and Related Transactions and Director Independence” in the Company’s Proxy Statement for the 2011 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A, which information is incorporated herein by reference.

ITEM 14 PRINCIPAL ACCOUNTING FEES AND SERVICES

Reference is made to the information set forth under the caption “Principal Accounting Fees and Services” in the Company’s Proxy Statement for the 2011 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A, which information is incorporated herein by reference.

PART IV

ITEM 15 EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) Documents filed as part of this Form 10-K

1. Financial Statements and Supplementary Data

Page Report of Independent Registered Public Accounting Firm 79 Consolidated Statements of Operations and Comprehensive Loss 81 Consolidated Balance Sheets 83 Consolidated Statements of Cash Flow 84 Consolidated Statements of Changes in Stockholders’ Equity 85 Notes to the Consolidated Financial Statements 86

2. Financial Statement Schedules (not applicable)

(b) See Exhibit Index below (c) Not applicable

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EXHIBITS Number Description 2.1 Exchange Agreement for 10,000 shares of common stock, dated October 1, 1993 (incorporated by reference to Exhibit 2.1 to the Registrant’s Registration Statement on Form S-1 (File No. 33-85904) as declared effective by the Commission on December 15, 1994 (the “1994 S-1”)). 3.1 Restated Certificate of Incorporation of Stillwater Mining Company, dated October 23, 2003 (incorporated by reference to Exhibit 3.1 to the Form 10-Q for the quarterly period ended September 30, 2003, filed on October 27, 2003). 3.2 Amended and Restated By-Laws of Stillwater Mining Company, (incorporated by reference to Exhibit 3.2 to the Form 8-K filed on December 29, 2004). 4.1 Form of Indenture, dated April 29, 1996, between Stillwater Mining Company and Colorado National Bank with respect to the Company’s 7% Convertible Subordinated Notes Due 2003 (incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-K, dated April 29, 1996). 4.2 Rights Agreement, dated October 26, 1995 (incorporated by reference to Form 8-A, filed on October 30, 1995). 4.3 Amendment No. 1, dated as of November 20, 2002, to the Rights Agreement between Stillwater Mining Company and Computershare Trust Company, Inc. (incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-K, dated November 21, 2002). 10.2 Mining and Processing Agreement, dated March 16, 1984 regarding the Mouat family; and Compromise of Issues Relating to the Mining and Processing Agreement (incorporated by reference to Exhibit 10.8 to the 1994 S-1). 10.3 Conveyance of Royalty Interest and Agreement between Stillwater Mining Company and Manville Mining Company, dated October 1, 1993 (incorporated by reference to Exhibit 10.9 to the 1994 S-1). 10.4 Palladium Sales Agreement, made as of August 13, 1998, between Stillwater Mining Company and Ford Motor Company (portions of the agreement have been omitted pursuant to a confidential treatment request) (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K, dated July 21, 1998). 10.5 Palladium and Platinum Sales Agreement, made as of August 17, 1998, between Stillwater Mining Company and General Motors Corporation (portions of the agreement have been omitted pursuant to a confidential treatment request) (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 8-K, dated July 21, 1998). 10.7 Employment Agreement between Francis R. McAllister and Stillwater Mining Company, dated July 23, 2001 (incorporated by reference to Exhibit 10.1 to the Form 10-Q for the quarterly period ended September 30, 2001). 10.8 Employment agreement between John R. Stark and Stillwater Mining Company dated July 23, 2001 (incorporated by reference to Exhibit 10.18 to the Form 10-K for the year ended December 31, 2001). 10.9 First Amendment Agreement to Palladium Sales Agreement between Stillwater Mining Company and Ford Motor Company, dated October 27, 2000 (incorporated by reference to Exhibit 10.20 of the Registrant’s 2000 10-K) (portions of the agreement have been omitted pursuant to a confidential treatment request). 10.10 Second Amendment Agreement to Palladium and Platinum Sales Agreement between Stillwater Mining Company and Ford Motor Company, dated March 27, 2001 (incorporated by reference to Exhibit 10.1 to the Form 10-Q for the quarterly period ended March 31, 2001) (portions of the agreement have been omitted pursuant to a confidential treatment request). 10.11 First Amendment Agreement to Palladium and Platinum Sales Agreement between Stillwater Mining Company and General Motors Corporation, dated November 20, 2000 (incorporated by reference to Exhibit 10.21 of the Registrant’s 2000 10-K) (portions of the agreement have been omitted pursuant to a confidential treatment request). 10.12 Refining Agreement between Stillwater Mining Company and Catalyst and Chemicals Division of Johnson Matthey Inc. dated July 27, 2000 (incorporated by reference to Exhibit 10.22 of the Registrant’s 2000 10-K) (portions of the agreement have been omitted pursuant to a confidential treatment request). 10.13 Second Amendment Agreement to Palladium and Platinum Sales Agreement between Stillwater Mining Company and General Motors Corporation, dated February 14, 2001 (incorporated by reference to Exhibit 10.24 of the Registrant’s 2001 10-K).

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Number Description 10.14 Employment Agreement between Greg R. Struble and Stillwater Mining Company, dated February 4, 2008 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed February 11, 2008). 10.15 2008 Restricted Stock Unit Agreement between Greg R. Struble and Stillwater Mining Company, dated February 4, 2008 (incorporated by reference to Exhibit 10.2 to the Form 8-K filed February 11, 2008). 10.16 Third Amendment to Palladium and Platinum Sales Agreement between Stillwater Mining Company and Ford Motor Company, dated March 13, 2002 (incorporated by reference to Exhibit 10.33 of the Registrant’s 2002 10-K) (portions of the agreement have been omitted pursuant to a confidential treatment request). 10.17 Employment Agreement between Terrell I. Ackerman and Stillwater Mining Company dated May 8, 2002 (incorporated by reference to Exhibit 10.34 of the Registrant’s 2002 10-K). 10.18 Amended and Restated General Employee Stock Plan, dated October 23, 2003 (incorporated by reference to Exhibit 10.1 to the Form 10-Q for the quarterly period ended September 30, 2003). 10.19 Employment Agreement between Stephen A. Lang and Stillwater Mining Company dated September 1, 2003 (incorporated by reference to Exhibit 10.2 to the Form 10-Q for the quarterly period ended September 30, 2003). 10.20 Stock Purchase Agreement between Stillwater Mining Company and MMC Norilsk Nickel and Norimet Ltd. dated June 23, 2003 (incorporated by reference to Exhibit 10.1 to the Form 8-K, dated June 23, 2003). 10.21 Registration Rights Agreement, Stillwater Mining Company and Norimet Ltd. dated June 23, 2003. (incorporated by reference to Exhibit 10.2 to the Form 8-K dated June 23, 2003). 10.22 Amended and Restated Refining Agreement between Stillwater Mining Company and Chemicals Catalyst and Refining Division of Johnson Matthey Inc. dated October 1, 2010, (portions of the agreement have been omitted pursuant to a confidential treatment request), (filed herewith). 10.23 Palladium Sales Agreement, made as of March 3, 2004, among Stillwater Mining Company and Engelhard Corporation (incorporated by reference to Exhibit 10.39 to the Form 10-K filed on March 15, 2004(portions of this agreement have been omitted pursuant to a confidential treatment request). 10.24 Employment Agreement between Gregory A. Wing and Stillwater Mining Company dated as of March 22, 2004 (incorporated by reference to Exhibit 10.40 to the Form 10-K filed on March 15, 2004). 10.25 Articles of Agreement between Stillwater Mining Company (East Boulder) Paper, Allied Industrial, Chemical and Energy Workers International Union, ratified July 2002 (incorporated by reference to Exhibit 10.41 to the Form 10-K filed on March 15, 2004). 10.26 Amendment No. 1 to Stockholders Agreement, dated as of March 19, 2004, made by and among Stillwater Mining Company and MMC Norilsk Nickel (incorporated by reference to Exhibit 2.1 to the Form 10-Q filed on May 7, 2004). 10.28 Articles of Agreement between Stillwater Mining Company (Stillwater Mine & Mill, and the Processing and Warehouse facilities) Paper, Allied Industrial, Chemical and Energy Workers International Union, ratified July 19, 2004 (incorporated by reference to Exhibit 10.1 to the Form 10-Q filed on August 5, 2004). 10.29 Credit Agreement, dated August 3, 2004, between Stillwater Mining Company and TD Securities (USA), Ltd. (incorporated by reference to Exhibit 10.2 to the Form 10-Q filed on August 5, 2004). 10.30 Fourth Amendment to Palladium and Platinum Sales Agreement between Stillwater Mining Company and Ford Motor Company, dated February 20, 2003 (incorporated by reference to Exhibit 10.1 to the Form 10-Q filed on November 2, 2004). 10.31 Fifth Amendment to Palladium and Platinum Sales Agreement between Stillwater Mining Company and Ford Motor Company, dated May 4, 2004 (incorporated by reference to Exhibit 10.1 to the Form 10-Q filed on November 2, 2004). 10.33 Contract between Stillwater Mining Company and USW International Union, Local 1, East Boulder Unit, effective July 10, 2005 (incorporated by reference to Exhibit 10.1 to the Form 10-Q filed on August 8, 2005). 10.34 409A Nonqualified Deferred Compensation Plan, (incorporated by reference to exhibit 10.34 to the Form 10-K filed on March 16, 2006). 10.35 2004 Equity Incentive Plan (incorporated by reference to Appendix A to the Proxy statement, dated April 29, 2004). 10.36 409A Non-Employee Directors Deferred Compensation Plan (incorporated by reference to Exhibit 10.1 to the Form-8K dated May 9, 2005).

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Number Description 10.37 Amendment No. 1 to Credit Agreement, dated August 3, 2004, between Stillwater Mining Company and TD Securities (USA), Ltd., dated January 31, 2006 (incorporated by reference to Exhibit 10.1 to the Form 8-K dated February 3, 2006). 10.38 Amendment No. 2 and Waiver to Credit Agreement, dated August 3, 2004, between Stillwater Mining Company and TD Securities (USA), Ltd., dated November 5, 2007 (incorporated by reference to Exhibit 10.1 to the Form 8-K dated November 8, 2007). 10.39 Articles of Agreement between Stillwater Mining Company (Stillwater Mine & Mill, and the Processing and Warehouse facilities) and United Steel Workers (USW) Local 11-0001, ratified July 16, 2007 (incorporated by reference to Exhibit 10.1 to the Form 10-Q filed on August 7, 2007). 10.40 Supplemental Memorandum of Understanding between Stillwater Mining Company (Stillwater Mine & Mill, and the Processing and Warehouse facilities) and United Steel Workers (USW) Local 11-0001, ratified September 4, 2007 (incorporated by reference to Exhibit 10.2 to the Form 10-Q filed on November 6, 2007). 10.41 Third Amendment Agreement to Palladium and Platinum Sales Agreement between Stillwater Mining Company and General Motors Corporation, dated August 8, 2007 (portions of the agreement have been omitted pursuant to a confidential treatment request), (incorporated by reference to Exhibit 10.3 to the Form 10-Q filed on November 6, 2007). 10.42 Palladium and Rhodium Sales Agreement, made as of August 8, 2007, between Stillwater Mining Company and General Motors Corporation (portions of the agreement have been omitted pursuant to a confidential treatment request), (incorporated by reference to Exhibit 10.4 to the Form 10-Q filed on November 6, 2007). 10.43 First Amendment Agreement to Palladium and Rhodium Sales Agreement between Stillwater Mining Company and General Motors Corporation, dated December 9, 2008 (portions of the agreement have been omitted pursuant to a confidential treatment request) (incorporated by reference to exhibit 10.43 to the Form 10-K filed on March 16, 2009). 10.44 Memorandum of Understanding between Stillwater Mining Company East Boulder Operation and United Steel Workers International Union, Local 11-001, East Boulder Unit, dated December 1, 2008 (incorporated by reference to exhibit 10.44 to the Form 10-K filed on March 16, 2009). 10.45 Form of 1.875% Convertible Senior Note due 2028 (incorporated by reference to Exhibit 4.2 to the Registrant's form 8-K, dated March 14, 2008). 10.46 Amendment No. 1 to Stockholders Agreement, dated March 10, 2008, among Stillwater Mining Company, MMC Norilsk Nickel, and Norimet Limited (incorporated by reference to Exhibit 10.1 to the Registrant's form 8-K, dated March 14, 2008). 10.47 Indenture, dated as of March 12, 2008, among Stillwater Mining Company, Law Debenture Trust Company of New York, and Deutsche Bank Trust Company Americas. (incorporated by reference to Exhibit 4.1 to the Registrant's form 8-K, dated March 14, 2008). 10.48 Registration Rights Agreement, dated as of March 12, 2008, between Stillwater Mining Company and Deutsche Bank. (incorporated by reference to Exhibit 4.3 to the Registrant's form 8-K, dated March 14, 2008). 10.49 Amended and Restated Secondary Materials Processing Agreement, dated as of June 7, 2005, among Stillwater Mining Company and Power Mount Incorporated (incorporated by reference to Exhibit 10.1 to the Registrant's form 8-K, dated December 9, 2008) (portions of the agreement have been omitted pursuant to a confidential treatment request). 10.50 Purchase Agreement, Stillwater Mining Company and Deutsche Bank, dated March 6, 2008. (incorporated by reference to Exhibit 99.1 to the Registrant's form 8-K, dated March 7, 2008). 10.51 Second Amendment Agreement to Palladium and Rhodium Sales Agreement between Stillwater Mining Company and General Motors Corporation, dated March 5, 2009 (portions of the agreement have been omitted pursuant to a confidential treatment request), (incorporated by reference to Exhibit 10.1 to the form 10-Q filed on August 7, 2009). 10.52 Palladium Sales Agreement between Stillwater Mining Company and General Motors LLC, dated January 1, 2011 (portions of the agreement have been omitted pursuant to a confidential treatment request), (filed herewith). 10.53 Amendment to Employment Agreement between Francis R. McAllister and Stillwater Mining Company dated November 3, 2010, (filed herewith). 10.54 Amendment to Employment Agreement between John R. Stark and Stillwater Mining Company dated November 3, 2010, (filed herewith).

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Number Description 10.55 Amendment to Employment Agreement between Gregory A. Wing and Stillwater Mining Company dated November 3, 2010, (filed herewith). 10.56 Amendment to Employment Agreement between Terrell A. Ackerman and Stillwater Mining Company dated November 3, 2010, (filed herewith). 18.1 Preferability letter from KPMG LLP dated March 30, 2005, (incorporated by reference to Exhibit 18.1 to the Form 10-K filed on March 31, 2005). 18.2 Preferability letter from KPMG LLP dated May 5, 2010, (incorporated by reference to Exhibit 18.1 to the form 10-Q filed on May 5, 2010). 23.1 Consent of KPMG LLP, Independent Registered Public Accounting Firm (filed herewith). 23.2 Consent of Behre Dolbear & Company, Inc., (filed herewith). 31.1 Rule 13a-14(a)/15d-14(a) Certification – Chief Executive Officer, (filed herewith). 31.2 Rule 13a-14(a)/15d-14(a) Certification – Vice President and Chief Financial Officer, (filed herewith). 32.1 Section 1350 Certification, (filed herewith). 32.2 Section 1350 Certification, (filed herewith). 101 The following materials from the Annual Report on Form 10-K of Stillwater Mining Company for the year ended December 31, 2010, filed on February, 22, 2011, formatted in XBRL (eXtensible Business Reporting Language): (i) Statements of Operations and Comprehensive Income (Loss), (ii) Balance Sheets, (iii) Statements of Cash Flows, (iv) Consolidated Statements of Changes in Stockholders’ Equity, (v) document and entity information, and (vi) related notes to these financial statements. Users of this data are advised pursuant to Rule 401 of Regulation S-T that the financial information contained in the XBRL document is unaudited and these are not the officially publicly filed financial statements of Stillwater Mining Company. The purpose of submitting these XBRL formatted documents is to test the related format and technology and, as a result, investors should continue to rely on the official filed version of the furnished documents and not rely on this information in making investment decisions. In accordance with Rule 402 of Regulation S-T, the information in this Exhibit 101 shall not be deemed "filed" for the purposes of section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by the specific reference in such filing.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

STILLWATER MINING COMPANY (“Registrant”)

Dated: February 22, 2011 By: /s/ Francis R. McAllister Francis R. McAllister Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature and Title Date

/s/ Francis R. McAllister February 22, 2011 Francis R. McAllister Chairman, Chief Executive Officer and Director (Principal Executive Officer)

/s/ Gregory A. Wing February 22, 2011 Gregory A. Wing Vice President and Chief Financial Officer (Principal Accounting Officer)

/s/ Craig L. Fuller February 22, 2011 Craig L. Fuller, Director

/s/ Patrick M. James February 22, 2011 Patrick M. James, Director

/s/ Steven S. Lucas February 22, 2011 Steven S. Lucas, Director

/s/ Sheryl K. Pressler February 22, 2011 Sheryl K. Pressler, Director

/s/ Michael S. Parrett February 22, 2011 Michael S. Parrett, Director

/s/ Michael Schiavone February 22, 2011 Michael Schiavone, Director

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Exhibit 31.1 CERTIFICATION

I, Francis R. McAllister, certify that; 1. I have reviewed this Annual Report on Form 10-K of Stillwater Mining Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: February 22, 2011 /s/ Francis R. McAllister Francis R. McAllister Chairman and Chief Executive Officer

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Exhibit 31.2

CERTIFICATION

I, Gregory A. Wing, certify that; 1. I have reviewed this Annual Report on Form 10-K of Stillwater Mining Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report ibi d b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting iil c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: February 22, 2011 /s/ Gregory A. Wing Gregory A. Wing Vice President and Chief Financial Officer

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EXHIBIT 32.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER OF STILLWATER MINING COMPANY PURSUANT TO 18 U.S.C. § 1350 Pursuant to 18 U.S.C. § 1350 and in connection with the accompanying report on Form 10-K for the period ended December 31, 2010 that is being filed concurrently with the Securities and Exchange Commission on the date hereof (the “Report”), I, Francis R. McAllister, Chief Executive Officer of Stillwater Mining Company (the “Company”) hereby certify that, to my knowledge: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. February 22, 2011 /s/ Francis R. McAllister

Francis R. McAllister Chairman and Chief Executive Officer The above certification is furnished solely to accompany the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) and is not being filed as part of the Form 10-K or as a separate disclosure statement.

119

EXHIBIT 32.2 CERTIFICATION OF PRINCIPAL ACCOUNTING OFFICER OF STILLWATER MINING COMPANY PURSUANT TO 18 U.S.C. § 1350 Pursuant to 18 U.S.C. § 1350 and in connection with the accompanying report on Form 10-K for the period ended December 31, 2010 that is being filed concurrently with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gregory A. Wing, Vice President and Chief Financial Officer of Stillwater Mining Company (the “Company”) hereby certify that, to my knowledge: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. February 22, 2011 /s/ Gregory A. Wing

Gregory A. Wing Vice President and Chief Financial Officer The above certification is furnished solely to accompany the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) and is not being filed as part of the Form 10-K or as a separate disclosure statement.

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BOARD OF DIRECTORS OFFICERS EMPLOYEES

Francis R. McAllister, 68 Francis R. McAllister, 68 The total number of employees as of Chairman of the Board and Chairman of the Board and December 31, 2010 was 1,354. Chief Executive Officer Chief Executive Officer SHAREHOLDERS 2, 3 Patrick M. James, 65 John R. Stark, 58 As of March 21, 2011 shareholders of Lead Director Executive Vice President, Chief record were 288. Independent Professional Corporate Commercial Officer and Corporate Counsel Director CORPORATE SECURITIES Gregory A. Wing, 61 Craig L. Fuller, 60 2, 3 Vice President and Chief Financial Officer Shares of Stillwater Mining Company President and Chief Executive Officer, common stock are traded on the New York Aircraft Owners and Pilots Association Terrell I. Ackerman, 57 Stock Exchange under the symbol SWC. (AOPA) Vice President, General Manager East Boulder Operations SHARE PRICE STATISTICS Steven S. Lucas, 45 1, 2 2010 High Low Partner, Nielsen Merksamer Parrinello Kevin G. Shiell, 53 First Quarter $ 14.52 $ 9.39 Gross & Leoni Vice President, General Manager Stillwater Mine Operations Second Quarter 18.48 10.70 Sheryl K. Pressler, 60 1, 4 Third Quarter 17.42 10.52 Self-employed Investment and Kristen K. Koss, 56 Fourth Quarter 22.86 15.37 Strategy Consultant Vice President, Human Resources 2009 High Low and Safety Michael Schiavone, 70 3, 4 First Quarter $ 5.27 $ 2.66 Former Chairman and CEO of Michael Dave A. Shuck, 51 Second Quarter 8.32 3.60 Schiavone & Sons, Inc. Vice President, General Manager Base Third Quarter 8.35 4.45 Metal Refinery Operations and Assay Fourth Quarter 10.37 6.01 Michael S. Parrett, 59 1, 5 Laboratory Self-employed Independent Consultant DIVIDEND POLICY Gregory K. Roset, 52 Stillwater Mining Company does not Mark V. Sander, 55 4, 5 Vice President, General Manager Smelter pay a dividend as it chooses to retain Partner, Plinian Capital Operations and Recycling Plant all earnings from operations for use in expanding and developing its business. Ajay Paliwal, 42 4, 5 Bruce E. Gilbert, 61 Payment of dividends in the future will Founder of Jiva Capital Vice President, Environmental be at the discretion of the Company’s Board 1. Audit Committee Ralph E. Green, 65 of Directors. 2. Compensation Committee Vice President, Exploration 3. Corporate Governance and Nominating Committee NEWS RELEASES 4. Safety, Health and Environmental Committee 5. Ore Reserve Committee The Company’s new releases, including INVESTOR RELATIONS CONTACT earnings announcements, are available on ANNUAL MEETING AND SHAREHOLDER INQUIRIES the Company’s web site. Tuesday May 3, 2011 Gregory A. Wing WEB SITE 1:30 p.m. MDT Phone: (406) 373-8700 MSU-B College of Technology For more information about the 3803 Central Avenue, Room 117 TRANSFER AGENT AND Company, please visit our web site at Billings, MT 59102 REGISTRAR www.stillwatermining.com. Management’s conference calls reviewing quarterly results FORM 10K Computershare Trust Company, N.A. are carried on the web site under the 250 Royall Street Investor Relations section, Event Calendar The Company will provide the Stillwater Canton, MA 02021 Mining Company Annual Report on heading. Please refer to the web site Phone: (800) 962-4284 for the schedule of quarterly Form 10-K, as filed with the Securities www.computershare.com and Exchange Commission, upon request. results announcements. Requests should be sent to the corporate headquarters. CORPORATE HEADQUARTERS METALLURGICAL COMPLEX 1321 Discovery Drive P.O. Box 1209 Billings, MT 59102 Columbus, MT 59019 Phone: (406) 373-8700 Smelter Phone: (406) 322-8900 Fax: (406) 373-8701 Smelter Fax: (406) 322-5975 www.stillwatermining.com Refinery/Lab Phone: (406) 322-8800 www.stillwaterpalladium.com Refinery/Lab Fax: (406) 322-5468 Recycling Business: (406) 373-8711

STILLWATER MINE EAST BOULDER MINE MARATHON PROJECT 2562 Nye Road P.O. Box 1227 90 Peninsula Road P.O. Box 365 Big Timber, MT 59011 P O Box 1508 Nye, MT 59061 Phone: (406) 932-8200 Marathon ON P0T 2E0 Phone: (406) 328-8400 Fax: (406) 932-8315 Canada Fax: (406) 328-8506 Email: [email protected]